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Have you ever considered what the penalty is when a property owner is unable to pay their taxes? Well as you may of guessed the IRS is intolerant and will do whatever is required to retrieve the taxes due, including forcing the buyer to foreclose on their home. On the outside this may seem like a very unpleasant situation, however, there are other sources of alternative financing available to assist this owner. That’s where individuals like yourself can profit while providing a possible ‘light at the end of the tunnel’ for the distraught home owner.

The local government will arrange a tax lien sale, where the public can bid on the right to provide the homeowner a loan in lieu of the home and/or commercial property. In return, the homeowner must pay the winning bidder back the full principle with interest, by a specific date. Both parties must agree with the terms and the date.

However, the caveat for the property owner is that if they don’t pay the loan as agreed upon, you, as the lien certificate owner may foreclose the property and take title of it. Everyone wins, so long as you are payed back the full amount of the tax debt plus the healthy interest owned. This way, you obtain a good interest rate on a very low risk investment, while saving someone from losing their property and/or home.

Obviously, a savvy business person would like the homeowner to be unable to pay back the loan or default on the loan terms, so that they can receive title on the property themselves. It’s in the homeowner’s best interest to pay their dues on the home and home tax loan, but if their financial situation was bad in the first place, there’s is a chance it may not improve anytime soon in this economy. In many cases, all odds are against the homeowner.

A tax deed sale is different then a tax lien sale. The main detail the two hold in common is that they’re both sold at local municipal government auctions. At a tax deed sale the municipality sells the actual property with title, with the top bid winning the rights to the property immediately. The current homeowners do not have an option to pay a new lender in an effort to maintain the property. Any outstanding liens and or penalities may or may not have to be honored as declared by the local or state governments. You can find which is the case beforehand by contacting these offices toavoid encountering any unexpected costs.

Tax lien sales and tax deed sales are two ways that a person can benefit from participating at a government auction. Imagine all the money that the winners of these auctions can profit by either charging the owners high interest, or taking over the home themselves and renting or reselling it for a handsome profit.