Property Q&A in Chicago>Question Details

John Potter,  in Cook County, IL

If taxes are too high, why would a tax scavenger buy?

Asked by John Potter, Cook County, IL Fri May 27, 2011

Help the community by answering this question:


Well, many are not buying, but it is not about the taxes.
The purchase of an unpaid real estate property tax bill is a possible way to obtain ownership of real estate worth more than the unpaid tax. The general
approach is to buy taxes where either there is not going to be any interest by
the current owner to redeem, or there is
a high probability they will do so.

In the first instance the tax buyer gets
property for a very good price, in the
2nd, the tax buyer gets a good return on
the capital invested until the taxes are
redeemed, or an outstanding value if
they are not.

1 vote Thank Flag Link Fri May 27, 2011

read Dave's answer below - it is a very good answer.

simply stated, there is no such thing as a tax scavenger. there are tax deed certificate/tax lien investors. banks and insurance companies have been investing in tax liens/tax deed certificates since the beginning of time. they use our money to invest in no risk opportunities such as these.

a tax deed/lien certificate immediately takes 1st lien position on the title of a property that has not paid taxes; this law is courtesy of the local municipality that the property resides in. when people don't pay property taxes, local governments can't pay teachers, police officers, firefighters, parks & recreation, etc. along with raising everyone's taxes, they sell the unpaid tax lien certificate to buyers so they can raise money and recoup the money they were supposed to get paid. quite frankly, if it were not for professional investors - local government cash flow would be in even worse position (and they are all running deficits as it is).

depending on the state, tax lien certificates pay out interest rates between 16%-52%/year and are guaranteed by the local municipality. so, investors like these investment vehicles because there is no chance of default. they get paid by the past due homeowner or they get paid by the local municipality or they get the property free and clear if no one pays them.

it is a good position to be in when investing in tax deed certificates. quite frankly, anyone who owns private property the next 10 years (at least) is going to be making up for the losses that have resulted from this real estate economic MESS this country is in.

ultimately, when property taxes on homes that are going into default/foreclosure are not being paid; who do you think has to make up the difference? Answer: All the homeowners who are paying on time!

Kind regards,
harry (investor/agent)
(312) 339-6758
0 votes Thank Flag Link Fri May 27, 2011
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