What is a tax deed in Florida?

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Florida sells both tax deeds and tax liens. Every single county in Florida allows tax deed sales. Both terms are similar but mean different things. Below we will describe what a tax deed is and how it is different from a tax lien. If you want to buy a home with an affordable price tag, a tax deed sale is an option to explore. 

What Is A Tax Deed?

When a house enters foreclosure, the ownership of the property is transferred through a tax deed. A tax deed sale is when foreclosed homes are put up for sale in an auction to pay off the annual tax debt. All homeowners are expected to pay annual property taxes. Tax liens are put on properties when homeowners don’t pay their property taxes on time. They are then notified and given a due date to pay. The due date for late payments can range from a few months to many years. If the property taxes aren’t paid by the due date, the property enters foreclosure and may be sold through a tax deed sale. This is an opportunity to place bids on properties being auctioned at drastically low prices.

How Tax Deed Sales Work

The way tax deed sales work can vary depending on the state where the property resides. In most cases, the county will first obtain a tax deed. This legal document grants the government the authority to sell a property in order to recoup unpaid taxes. This is when the government can place the property for auction. The county sets a minimum price for the home. The highest bidder will win the property. If the highest bidder pays over the amount of tax due, the extra can be given to the previous owners of the property, if requested. The time frame to request varies from state to state, so it is important to check your state’s regulations.

There are additional costs after a tax deed sale. You will have to remove the “cloud”, in order to sell the home. To clear the cloud there are two avenues you can take: A title certification that verifies the tax deed sale and tax foreclosure procedure can be ordered. If you take this avenue, a consultant and title insurance agent will remove the cloud and give you the title. This usually costs around $2,000. The second option is to file a lawsuit called a quiet title action. Although prices will differ, you should budget at least $2,000 for this. 

What Is The Difference Between A Tax Lien And Tax Deed?

While most people think tax lien and tax deed mean the same thing, they are actually completely different. The government puts a lien on a home when the property taxes aren’t paid. The lien prevents the residence’s owners from selling their home until the debt is settled. The government may sell the tax lien at a public auction if the home’s owners don’t pay their taxes within a specific time frame. The highest bidder receives a tax lien certificate that entitles them to pursue the home’s owners for unpaid property taxes. A tax lien occurs before a tax deed sale. The highest bidder must also pay the tax bill, but still profits due to interest placed on the owner’s debt. Owners typically have a few months to 3 years to pay, depending on the state. 

This process may be confusing to first time investors. A lot of first time investors in Florida make many mistakes, costing them a major loss in profit. It is crucial to be aware of the process and the various steps that take place even after winning the bid. There are many experts, such as veteran investors and real estate lawyers, that can provide assistance throughout this process. This will prevent you from losing tons of money.

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