Business & Finance Finance

Tax Lien Records

In order to understand the relevance of tax lien records, we first have to see what tax liens are in the first place. Tax liens have to do primarily with unpaid property taxes by property owners. Owners of all kinds of real estate property are entitled to pay taxed to the county or state government based on their jurisdiction. When they fail to pay their taxes on time, the government takes action on the defaulting owners.

Taxes are an important means of revenue to the government which help it fund its various administrative activities. When the flow of taxes gets chocked, the government finds its ability to function effectively diminished and hence takes tax defaults seriously. In order to penalize defaulting tax payers in an effort to discourage repetitive lapses, the government slaps a tax lien on the delinquent taxes which the property owner has to pay back within a prescribed period of time.

While the property owner needs time to pay back the taxes, the government needs its tax money urgently to carry out its various duties. To satisfy both requirements, the government has devised an arrangement whereby it allows interested investors to come up with the tax money and pay it on behalf of the property owner. The money that the investor pumps in covers the entire amount of unpaid taxes plus the lien amount that the government had imposed on the taxes. This arrangement essentially helps the government get back its tax money without further delay. It also helps the property owner by buying him some time to return his dues. As long as the tax lien is in force, the investor is paid an interest for his contribution to this effort.

A large number of investors are attracted to tax lien investments due to the higher rate of interest that this form of investment fetches them. Tax lien records of the properties whose taxes remain unpaid are maintained by the local governments through which investors come to know about these investment opportunities. These tax liens are put up for sale in an annual auction. Tax lien records are thus an important form of information that help in locating properties with a high potential for return on investment.

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