What is a Tax Deed?
The term tax deed refers to a legal document granting ownership of a property to a government body when the owner fails to pay any associated property taxes. A tax deed gives the government agency the authority to sell the property to collect the delinquent taxes. Once sold, the property is then transferred to the purchaser. These transactions are called “tax deed sales” and are usually held at auctions.
Tax Deed Definition
A tax deed grants ownership of a property to a government body when the owner fails to pay the associated property taxes. Tax deeds are sold to the highest bidder at auction for a minimum bid of the outstanding taxes plus interest and the costs associated with the sale.
At the close of the auction, the county receives the total delinquent tax assessment, and the former owner receives the net proceeds after taxes and penalties. Property owners may file a claim to receive any amount paid to the municipality in excess of the property taxes plus interest.
How does a Tax Deed work?
A property tax is any tax paid on a piece of real property. Taxes are assessed by the municipal government in which the property is located and paid by the owners of real estate. There is implied understanding that owners of real estate property are responsible for paying property tax assessments.
The taxes collected are used to fund various municipal programs such as water and sewer improvements, law enforcement and fire service, education, road and highway construction, public servants, and other services. Property tax rates vary by jurisdiction.
What Is a Tax Deed Sale?
In a tax deed sale, the property with the associated delinquent property taxes is sold. The sale takes place through an auction with a minimum bid of the amount of back taxes owed plus interest, as well as costs associated with selling the property. The highest bidder wins the property.
The tax deed legally transfers ownership to the purchaser on one condition: The new owner must often pay the entire amount owed within 48 to 72 hours, or the sale is canceled. Any amount bid by the winning bidder in excess of the minimum bid may or may not be remitted to the delinquent owner. This depends on the jurisdiction.
What Is the Difference Between a Tax Deed and Tax Lien?
A tax lien is a legal designation that one party has rights to collect proceeds or value from a property. All liens are subsequent rights to receive value from an asset. A tax deed is the full transmittal of the title of a property due to property tax delinquency.
How Do I Clear a Tax Deed?
Unpaid property taxes result in a tax deed or tax deed sale. A tax deed will typically clear prior to auction and remain with the original property owner if all tax obligations are satisfied and associated fines, interest, and fees are paid.
Are tax deeds transferred in closing costs?
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Financial Consultant and Author