Your Complete Due Diligence Checklist for Tax Lien and Deed Investing

Investing in tax liens and tax deeds can be a lucrative path to generating passive income, acquiring properties below market value, and diversifying your investment portfolio. But without proper due diligence, what looks like a goldmine can quickly become a money pit.

This article is your complete, no-nonsense due diligence checklist—designed to walk you through what to research, how to evaluate a property, and the critical red flags to watch for before you place a bid or buy a lien or deed.

Property Research: What to Investigate Before You Bid

Before you get excited about a 3-bedroom home with unpaid taxes, you need to uncover every detail about the property—because you’re not just buying a potential asset, you’re also inheriting its risks.

Verify Property Information

The county’s tax auction list will give you basic info—but it’s your job to dig deeper:

Owner’s name and mailing address
Property address (verify it actually exists)
Parcel ID (used to look up legal details)
Assessed and market value (check with county assessor and Zillow/Redfin)
Land use/zoning classification (residential, commercial, etc.)
Lot size and structure size (if applicable)

Check for Physical Red Flags

Whenever possible, drive by the property or use Google Street View. Look for:

Burned or boarded up buildings
Overgrown yards or neglected maintenance
Signs of squatters or abandonment
No visible structure (just empty land)
Remote, inaccessible locations

If you can’t physically visit, many investors use satellite tools like Google Earth, or hire someone local via TaskRabbit or Craigslist.

Run a Title Search

You need to know what you’re really buying. Many liens and deeds come “as-is,” with all warts included. Look for:

Mortgages
IRS liens
Code enforcement violations
HOA dues
Other tax liens (especially city vs county)
Bankruptcy or probate issues

You can do a basic title search online through the county records, or pay a title company for a more thorough report (recommended for higher-value properties).

Legal and Tax Considerations Every Investor Must Understand

It’s easy to assume the process is the same everywhere—but every state has different laws and procedures for tax lien and deed sales. Skipping this step can be costly.

State-by-State Differences

Here’s a table comparing key legal aspects by investment type:

Factor	Tax Lien	Tax Deed
What You Buy	Lien against unpaid property taxes	Legal ownership of the property
Ownership Transfer?	No (until redemption or foreclosure)	Yes, usually after auction
Redemption Period	Yes, varies by state (6 months – 3 years)	Rare or short (some states allow)
Interest Earned	Yes, typically 8–24%	No interest; you profit from resale
Risk Level	Lower risk (but longer return timeline)	Higher risk, faster potential rewards

Check the laws in the state you’re investing in. Some states sell only liens (e.g., Florida, Illinois), others sell only deeds (e.g., California, Texas), and some offer both (e.g., Georgia, Arizona).

Know the Redemption Process

Who can redeem: Usually the original owner, but sometimes heirs or lenders.
When they can redeem: During the redemption period, which varies by state.
What they must pay: The lien amount plus interest and penalties.

You must understand how long you’ll need to hold the lien, what steps you must take to foreclose, and what the outcome could be.

Financial and Investment Red Flags: Protecting Your Money

Buying a tax lien or deed is not the same as buying a normal piece of real estate—it’s more like buying a puzzle that may or may not have all its pieces.

Know the Property’s Market Value

Never base your decision solely on the assessed value from the county—it’s often outdated or inaccurate. Cross-check:

Zillow, Redfin, Realtor.com: To find the estimated market value
Recently sold comps: Check nearby sales to see the true market price
Cost of repairs: Ask local contractors or use rough estimates

Understand Total Liens and Costs

What you’re paying is not just the tax amount. Add up:

Opening bid or lien amount
Premiums (some counties let people bid above the lien)
Administrative fees and recording costs
Legal fees if you need to foreclose
Property rehab or clean-up costs
HOA or utility bills that might transfer

Always estimate the Total Investment Required to determine whether the return justifies the risk.

Ask: Why Has No One Redeemed This Yet?

If a property has had unpaid taxes for years, or has gone through multiple auctions, there’s probably a reason. Ask yourself:

Is the neighborhood declining?
Is the property landlocked or unbuildable?
Are there toxic issues (asbestos, oil tanks)?
Is there a hidden legal cloud?

If a property seems “too good to be true,” you should assume something is wrong until proven otherwise.

Frequently Asked Questions About Tax Liens and Deeds

What’s the difference between tax liens and tax deeds?

Tax lien investing involves buying the debt on unpaid property taxes. You earn interest when the owner repays.
Tax deed investing involves buying the property itself at auction due to unpaid taxes.

How much money do I need to get started?

It depends on the county and state. Some liens start at a few hundred dollars. Deeds can range from $1,000 to over $100,000 depending on the property and location.

Can I lose my money?

Yes. If you don’t do proper due diligence, you could buy a worthless property, one with toxic liens, or land you can’t access. You could also be outbid or have your lien redeemed with low interest.

Do I get the property automatically?

Not with tax liens. You must follow legal foreclosure procedures, which can take months or years. With tax deeds, you may get the property at auction, but always check for redemption periods and title issues.

Can I get a clear title after buying a tax deed?

Often, no—not right away. You may need to go through quiet title action or a similar legal process to remove prior claims and obtain insurable title.

Where can I find auctions?

Check your local county tax collector or treasurer’s website. Many auctions are now held online through platforms like:

RealAuction.com
Bid4Assets.com
GovEase.com
Grant Street Group

Conclusion: Be the Investor Who Knows the Pitfalls and the Profits

Tax lien and deed investing can absolutely be a smart, high-yield way to build long-term wealth—but only for those who treat it like a business, not a gamble.

When you perform thorough due diligence:

You avoid problem properties that drain your wallet
You maximize returns with better timing and smarter bids
You build a repeatable process you can scale over time

Quick Recap of Your Tax Lien/Deed Due Diligence Checklist:

Checklist Item	Why It Matters
Verify property details	Avoid bidding on the wrong parcel
Research physical condition	Spot red flags like damage or abandonment
Run a title search	Uncover liens, debts, or legal entanglements
Understand local laws	Every state works differently
Evaluate total costs	Avoid underestimating the true investment
Know redemption terms	Helps you calculate risk and return timeline
Look into market value and comps	See if the deal actually makes financial sense
Check for repeat listings or history	Could indicate a problematic property

The best investors aren’t the ones who “get lucky”—they’re the ones who do the most homework.

If you’re just getting started, begin with low-risk liens in lien states and build your skills. With time, you’ll learn how to spot diamonds in the rough—and avoid the financial landmines that trip up so many beginners.