Top 10 Tax Lien Terms You Need to Know

There is a reason why vocabulary lessons were so important in grade school. They are the building block for understanding different concepts and ideas. Knowing the common tax lien terms will help provide you with a deeper understanding of how tax lien investing works.

Ten Tax Lien Terms You Need to Know

  1. Redemption

    Redemption occurs when the debt is settled. Whether it’s initiated by another investor or the property owner, this occurs when the debt has been paid off. When a certificate redeems, the investor earns their money back plus interest and fees.

  2. Redemption Period

    The redemption period is the period of time that protects a property owner from foreclosure. The property owner has a specific amount of time to pay their delinquent taxes before the property can be foreclosed on. This time period varies by state, but is typically around two years.

  3. Face Amount

    The face amount is the amount that the lien certificate started at. The face amount does not include interest or fees, but only the value of the lien.

  4. Redemptive Amount

    Unlike the face amount, the redemptive amount equals to the value of the lien, plus interest and fees that have accrued. Tax lien certificates are generally purchased at the redemptive amount.

  5. Certificate Life

    All lien certificates have an expiration date. Expiration dates vary by state, but some are as long as 7-10 years. The certificate life is determined from the date of when it was issued, not when it was purchased.

    tax lien terms

  6. Roll-Up

    Because there are often several certificates on a property, it’s important to understand the roll-up. The roll-up refers to all of the outstanding taxes on the property. In order to foreclose on the property, all of the delinquent tax years must be paid off.

  7. Tax Deed Application (TDA)

    When trying to foreclose on a property, a tax deed application must be filed. There is a fee to file the TDA, but the fees are reimbursed after the redemption check has been issued.

  8. Tax Deed Auction

    After the property owner has been notified of the foreclosure, the property owner has 30-60 days to satisfy their tax debt. If they fail to do so, the deed will go to a tax deed auction.

  9. Working Capital

    Working capital means setting funds aside to use toward roll up and fees. Using working capital as a part of your exit strategy may help you prepare for any additional funds needed to foreclose on the property.

  10. Horizon Lien to Value (HLTV)

    Working capital means setting funds aside to use toward roll up and fees. Using working capital as a part of your exit strategy may help you prepare for any additional funds needed to foreclose on the property.

Staying up to date on tax lien terms helps provide a solid foundation for your tax lien education. These terms are used frequently throughout our training materials, so take some time to familiarize yourself with them.

North Dakota Tax Deeds

June 4th, 2020|Comments Off on North Dakota Tax Deeds

North Dakota Tax Deeds  Sale Type:  -  Interest Rate:  -  Bid Method:  -  Redemption Period:  -  Sale Date(s):  -  State Statute(s):  -  Over-the-Counter:  -  State Website:  - North Dakota State Overview  [...]