How tax lien certificates work
Information only, not investment or legal advice. Sale dates, terms and deadlines change; always confirm with the county before you register or bid.
A tax lien certificate is a claim on a property for unpaid taxes. When you buy one, you pay the county what the owner owed. In return, the owner owes that money to you, with interest or a penalty set by state law.
The life of a certificate
- Before the sale. The county publishes a list of delinquent properties, usually weeks ahead. Owners pay off many of them before sale day, so the list shrinks.
- The sale. Bidders compete for each certificate. How they compete depends on the state (see below).
- The redemption period. The owner can pay off the certificate at any time during this period. The county collects the payment and sends you your money plus interest.
- If the owner doesn't redeem. You may be able to apply for a tax deed or start a foreclosure. This step has its own deadlines, notice rules and costs, and missing them can wipe out your certificate.
How bidding works
States use different methods, and the method shapes your return:
- Bid-down interest. Bidders offer to accept a lower interest rate. The lowest rate wins.
- Premium bidding. Bidders pay more than the tax owed. The premium may or may not earn interest or be refunded.
- Bid-down ownership. Bidders offer to take a smaller share of the property.
- Rotational or lottery. Certificates are handed out in turn or at random at a fixed rate.
How you get paid
In most states the owner pays the county, and the county pays you. You don't collect from the owner directly. Many counties also let you pay later years' taxes on the same property (often called subsequent taxes or endorsements), which can earn interest too.
What to watch for
- Bankruptcy can freeze your ability to collect for a long time.
- Worthless parcels like slivers of land, landlocked lots or contaminated sites may never be redeemed, and you may not want them.
- Expiring certificates. Most states give you a limited window to act if the owner doesn't pay. Put it on your calendar the day you buy.
Each state page covers how that state's sales work, with links to the state and county rules.