Tax Sale Attorney Explains the Basics of Buying Tax Liens in Georgia

Tax Sales

If you’re looking to buy a tax lien property at a tax sale, you probably have many questions about the legal process of acquiring new real estate. Investing in tax deeds can appear to be an easy and quick way to make money in real estate. But is this true? Not necessarily. There’s more you need to do beyond buying a tax deed at auction.

How A Tax Sale in Georgia Works

As you know, January 1st of each year is significant for homeowners, investors, and purchasers alike because it’s the day property taxes come due. Here in Georgia, when your taxes come due, the county tax commissioner gets an automatic lien against your property to secure the payment of your property taxes. If you don’t pay, that lien attaches to your property.

Why A Property Goes to Auction

Once your property taxes become “past due” and payments continue to be delinquent, the tax commissioner can start foreclosure proceedings. This means the commissioner can foreclose on your property and can sell it at public auction to pay what is owed in property taxes.

Georgia Tax Sale

The tax commissioner can proceed in one of two ways:

  • Nonjudicial tax sale – which does not involve the courts, and is generally faster and cheaper
  • Judicial tax sale – which is a court proceeding, generally takes longer, and is more expensive

Once the tax commissioner has “levied” upon the property (i.e., started the foreclosure proceedings), the additional levy costs and fees are added to the delinquent account, increasing what’s owed. Only certified funds are accepted from the delinquent property owner as payment, and everything owed must be paid in full. If it cannot be paid, the property will proceed to tax sale.

Once a property is earmarked for tax sale, more costs are added to the delinquent account for title research, advertising, and other necessary actions. At this point, the original owner still has the option to pay everything – all applicable taxes, costs and fees – with certified funds to prevent the property from going to auction.

If the full amount cannot be paid, the auction will proceed, and the highest bidder for the amount of unpaid taxes (plus fees and other costs) becomes the new owner.

Foreclosure and the Right of Redemption

But it’s not over yet.

The property may be sold, but that does not mean the tax sale purchaser has free and clear title. This is because, in Georgia, the former owner has 12 months after the tax sale to reimburse the purchaser for the amount the purchaser paid at the tax sale (in addition to other costs and penalties, typically a 20% penalty) to reclaim their home.

For a purchaser to gain clear title, they must wait 12 months after the sale and then foreclose on the original owner’s right of redemption.

This is done by giving sufficient legal notice to the former owner that their right will expire on a certain date, at least 12 months after the foreclosure sale. The original owner can redeem the property up to the expiration date listed in that notice. Generally, this means there are about 30 days after the written notice is received within which the former owner can exercise their right to redeem.

Tax Lien Investing Risks

Investors are frequently led to believe that all they have to do to make a quick return on their real property investment is to purchase a tax deed, wait one year, and then either sell the property for a profit or get their full purchase price back plus 20% if the homeowner redeems within the 12-month time limit.

But it’s just not that simple.

First, a tax lien foreclosure does not necessarily wipe out all liens. There may be irregularities in the foreclosure or there may be other liens with priority.

Next, foreclosing on a homeowner’s right to redeem (sometimes called “barment”) can be a complicated process. It requires running a title search, and locating, properly notifying, and serving all prior owners, prior lienholders, tenants, and anyone else with a legal or equitable interest in the property of the barment action. Once that is done, the property is still not yours “free and clear” so to speak. There will still be a cloud on the title.

Quiet Title Action

If the homeowner did not redeem the property in one year, and your barment has been successfully completed, then the property is yours. But that does not mean you will have a clear title or be able to sell it or use it as collateral for a loan.

Why not?

Because the tax sale itself created a cloud (or defect) on the title. In order to clear title, you will need to bring a quiet title action. A quiet title action is an action that is filed to establish a person’s right of ownership in real property against other claimants.

In Georgia, there are two types of quiet title actions: a conventional quiet title action, and a quiet title action “against all the world.” While a conventional quiet title action will clear the cloud on title, an action against all the world will also eliminate other disputes, such as easements or boundary line disputes.

For Help with Purchasing Tax Lien Properties, Contact the Lawyers at the Law Offices of Mark Weinstein PC

Tax sales are very complicated and many issues can arise when acquiring real estate through tax sales. Real estate investors, or those simply looking to secure a home or other property through a tax sale, can benefit from the advice and guidance of a seasoned Georgia tax sale attorney. The attorneys at the Law Offices of Mark Weinstein, PC have helped hundreds of homeowners and investors alike navigate the complicated tax sale process. We have the experience and practice focus needed to help you obtain clear title to your tax sale investment property.