The Florida tax deeds unique tax sale system requires tax lien investors to put a little bit more “sweat equity” into their investing process up front but that rewards investors for this on the back end.
By Charles Sells
In Florida, when an investor buys a tax lien from a tax sale, they are actually bidding on a tax lien certificate. That certificate entitles the holder (the winning bidder) to apply for a tax deed if the lien is not paid off in the next 2-7 years, depending on the terms of the certificate. The certificate entitles the investor to receive payment once the tax deed is auctioned off if the lien is not redeemed by the property owner. It is after the tax deed auction that ownership of the property is actually transferred to a new individual and the winner of the auction now has control of the property. We often refer to these deeds as “dirty” because you will usually need a title certification or a Quiet Title Action before you can move forward with your investment strategy.
Florida tax sales have multiple steps that cause many investors to avoid them because they seem too complicated compared to other states like Georgia, Kentucky, or Illinois. However, the longer process actually represents increased opportunities for tax lien and tax deed investors who understand where and how to get involved in the process.
Here are three reasons you could clean up by investing in one of Florida’s “dirty” tax deeds:
The system allows for focused strategies
Because the system is complicated and has multiple steps where an investor can enter the lien and redemption processes, a savvy investor can optimize their chances of getting the outcome they want from Florida tax sales. If you are an investor who is not really interested in owning properties and just wants to have the lien paid off with the high interest rates tax sales are famous for, you can optimize your chances by investing earlier in the process. If you prefer to acquire properties through tax sales, then you will want to get involved in the later stages.
Florida’s tax sales are intimidating
Investors who are active in the Florida tax deed auction process tend to be familiar with the groundwork behind the system and know how to navigate the process.
Newer investors tend to become overwhelmed, invest in properties that will be difficult to navigate through the system, or to buy at the wrong time and/or pay too much. This means that for an investor established in the Florida system or working with a group that has a history working in this system there will be an inherent competitive advantage over other investors participating in the auctions. Established investment groups will be able to help you identify properties whose “dirty” titles are more likely to clear easily and when it is better to just walk away from an opportunity.
Florida tax deeds sales have a reputation for being “risky”
If the complicated nature of Florida tax deeds and tax sales were not enough to limit competition, the Florida bar made things even more intimidating back in 2007, when it published an article stating tax sales in the state were “getting risky” because property owners who can prove they did not receive notice of their delinquent taxes could delay the entire process and even fight paying interest and fines on the overdue taxes.
Many investors simply backed away at that point, assuming the risk to be too great. In reality, however, the burden of notifying homeowners they owe property taxes lies largely on the tax clerk where the property is located. While at the time of publication, Florida’s real estate market was struggling with an overload of properties that were going through foreclosure and had been abandoned by their owners sometime during this process (making them difficult to reach), the reality is that today an informed investor can fairly simply ensure their responsibilities to a title-holder are met. However, perception has not yet caught up with reality, so an alliance with an established, knowledgeable Florida tax sale strategist can give you a huge advantage in a market with many attractive investment options.
As with any investment strategy, Florida tax sale investing requires planning and preparation. With the right knowledge, investors can acquire properties or just generate solid returns by navigating Florida’s purportedly “dirty” tax deed system.