To help in understanding the difference, we'll look at both possibilities when referring to tax deed certificates.
I'll break down the phrase 'tax deed certificates'.
Tax Deed Certificates - What it Could Mean
Tax Deed Certificates - 'Tax Deed' is the proper way to describe a deed granted to a tax sale buyer, which gives the tax sale buyer title to the property.
1. This could happen as a result of the buyer successfully bidding on the property at a tax deed sale. This buyer would receive title to the property as soon as the county can issue the tax deed. You'll find this method in about half the states.
2. A buyer could also get a tax deed if he bought a tax lien certificate and was not redeemed (paid back) in the allowed time. If that happens, the buyer can apply for a tax deed and will be issued one if all procedures were followed properly and the owner still doesn't pay.
Tax Deed Certificates The person saying "Tax Deed Certificates" likely means "tax lien certificates. This is a certificate that you buy from the county, which in effect pays the taxes for a particular property that's delinquent.
The owner has a certain amount of time to pay the tax certificate investor back (with a handsome interest rate of 10% or higher!) Or, as mentioned earlier, the county will eventually grant a tax deed to the investor as the investor's return, if the owner doesn't come through.
The important thing to realize why the term "tax deed certificates" is a bit dangerous to use. When you buy a tax certificate, you DO NOT get any ownership interest in the property. You are not allowed to enter the property and really should just leave it alone.
However, any time you get a tax deed to a property, you DO have ownership of that property and can take action needed to get possession.
Never take over a property, even if it's vacant, based only on the fact you purchased a tax certificate.
Downsides of Tax Deeds and Tax Certificates
Whichever investment method you choose, you'll have some downsides to deal with.
If you buy a tax deed, you'll have to bid against others on a property you can't even inspect. Tax deed sales are surprisingly competitive and prices often get bid very high. You also have to have all cash at the sale.
Tax certificate investors have to wait many months, even years, to get title to property. But they hardly ever get the chance, because almost all liens pay off before a tax deed can be obtained. It's a great investment to earn interest, not such a great investment to acquire properties.
An Insider Secret
You can avoid almost all of the issues above by just contacting the owner of the property shortly before a tax deed is about to be issued. Many times you'll find owners who don't even want the property and will practically give it to you. In other cases you can buy cheap and flip to another investor.
Get the details below with my free Insider's Guide. Just don't say you have "tax deed certificates" for sale!