How to Protect Your Tax Lien Interests During the Pandemic

Tax lien investors have always been charged with protecting their tax lien interests.

This is something you must accept if you want to invest in this sector, and it is not that hard to do once you understand the rules. However, in today’s market, understanding the rules can be complicated since many tax lien investors place capital in multiple markets around the country, thereby placing themselves in a position where they are subject to multiple jurisdictions and local regulations.

During the COVID-19 pandemic, there are more things than ever for tax lien investors to keep track of with their tax lien interests. As pandemic release laws are increasingly initiated at a federal level and then trickle down to state and local governments, often even the local policymakers and administrative offices do not know exactly what their own guidance entails. This is why it is imperative that tax lien investors know what questions to ask and to whom they must address these queries.

How to Handle Evictions During the Pandemic

In most cases, tax lien and tax deed certificate investors prefer not to evict homeowners who have lost their properties to taxes.

Indeed, I have met many investors who will bend over backward in order to avoid this, even paying moving costs or taking other extreme measures to help these distressed homeowners figure out how to either pay off the lien or find new housing without feeling duress. However, during the coronavirus pandemic, the eviction process and everything leading up to it must be both thoroughly documented and follow the absolute letter of the law. Fail in either of these things and you could have a very nasty situation on your hands with your tax lien interests.

One thing every tax lien investor needs to understand is the impact of the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) on their investments. This legislation was passed at the federal level, but many states “added on” once the federal legislation was enacted. In many cases, this meant enacting regulations to protect homeowners from evictions and foreclosures during stay-at-home mandates. On the most basic level, this often meant postponing tax sales. However, in some cases it may also mean that you cannot engage in the redemption, eviction, and disposition of your tax-lien properties on your usual timeline. If you attempt to do so without being fully informed about how local, state, and federal laws affect this process, you could find yourself on the wrong end of a lawsuit.

3 Things to Know About Forbearance

Probably the biggest impact the CARES Act has had upon tax-lien investors is that it includes a mortgage forbearance provision. This provision allows homeowners with federally backed mortgages to request a 90-day reprieve on their home loans. This can result in an extension, for all intents and purposes, on property tax payments as well if the mortgage payment includes property tax payments. The result has been that many local governments have changed redemption periods and deadlines in order to help smooth the path to forbearance.

Before you assume that tax lien investing is simply out of the question for now, there are three things you should know about forbearance:

  1. It does not apply to all loans.
  2. It will likely have more of an effect on future tax sales than on your current holdings.
  3. It may lead local governments to change their regulations on your redemption process.

All of these things are important and must be tracked carefully, but it is not the end of the world for tax investors. If you are worried, consider working with an investment firm like PIP Group that specializes in tax sales and tax lien investing. This will give you increased access to information and may even enable you to hire someone to manage this rapidly changing process.

Learn more about tax sales before, during, and after the COVID-19 pandemic at PIPGroup.com.

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About the Author

Charles Sells is the founder and CEO of The PIP Group, a turnkey service provider that focuses on investments in distressed real estate assets including tax liens, tax deeds, traditional foreclosures, fix-and-flips and long-term cash flow acquisitions. He has been involved in tax lien investing for over 20 years, during which time The PIP Group has grown to become one of the largest agencies of its kind with nearly 1,000 individual and institutional investors worldwide.

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