Tax Foreclosures - Government Foreclosures

A tax foreclosure is a legal procedure used by government agencies to enforce a lien against a property for non-payment of income taxes or property taxes. Government agencies hold tax foreclosures one to four times a year.

The IRS will sometimes place a tax lien on a home or other real property and sell it at an auction to recover the unpaid income taxes. When a tax lien is put on a property, it takes priority over all other liens on the property.

State and local governments raise revenue via property taxes. When property taxes become delinquent, an involuntary tax lien is placed on the property by the taxing authorities to recover the amount owed. If the delinquent taxes are not paid within a predetermined time frame, the property is then sold at public auction. A minimum opening bid is required that covers the delinquent property tax amount, legal costs, interest, penalties, and miscellaneous fees.

Tax Foreclosures - Bank Foreclosures

The highest bidder at the auction receives a tax sale certificate when he pays the bid amount. The delinquent property owner can regain title to the property if they pay back the lien amount plus interest and miscellaneous expenses before a redemption period set by law expires. The redemption period can vary from several months to several years in some states. If the delinquent property owner exercises his right to redemption, they must pay an interest charge that can be fairly large on the amount paid at foreclosure by the purchaser.

When the redemption period expires, the purchaser can petition the court to foreclose and remove the delinquent party’s right of redemption. When the tax foreclosure process is complete, the court issues a deed that conveys the property title to the purchaser. If the bid amount was greater than the amount owed to the government, the excess amount will go to the next property lien holder or to the previous owner if there is no lien holder.

All liens on the foreclosed property are generally removed upon completion of the tax foreclosure process. However, if a previous lien holder attempts to enforce their lien on a foreclosed property, it is the new owner’s responsibility to defend against their claim.

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Determine the Real Estate Financial Statistics for a Property

Before you buy an investment property it is critical that you create your own projection of the property's profitability. Real-Estate-Proforma.com has a quick-proforma with which you can calculate real estate financial statistics such as Internal Rate of Return, Capitalization Rate, Cash-on-Cash, Debt Multiplier, Loan-to -Value Ratio, Debt Coverage Ratio, and Mortgage Payments. You can use this JavaScript proforma to project the profitability of a real estate project. By becoming a member you will receive access to a number of Excel real estate proformas. membership | services

If you are analyzing another person's proforma, or you are examining a prospectus for a real estate deal, it is very important that you read the document carefully and determine how the values of the financial statistics above are being calculated. For instance, values such as the Cap Rate may be determined from overly optimistic projections of the future rental income of a property.

You can "reverse engineer" the financial projections you receive from a prospectus and/or request the Excel (or other type of) spreadsheet a developer used to create their proforma. A very useful Excel or Visual Basic macro used to check Excel formulas is available in the spreadsheet below for download. Download Mortgage Formula Excel Spreadsheet

The due-diligence you do on a potential investment may uncover a number of potential problems with a real estate deal and we suggest you research each real estate investment very carefully. There are a variety of real estate financial consultants who can help with this, but if you are like many Real-Estate-Proforma.com members, you can or are learning to do your own due-diligence.

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