Tax Liens

Tax liens occur when a government imposed tax is not paid by an individual or entity. This occurs not only in real estate but also in other types of taxes such as income or personal property taxes. Various entities of government impose tax liens.

In some states when a property tax is unpaid by a property owner, the local government unit will issue a tax lien. When the lien goes unpaid, some jurisdictions sell tax lien certificates. A tax lien certificate is basically a financial instrument that gives the bearer an interest in the real property.

There are multiple scenarios that can occur with tax lien certificates. A certificate can be redeemed in accordance with local government regulations. In this instance, the investor is paid off and the property owner retains control of the property. Conversely, a certificate can be foreclosed and the purchaser can gain ownership interest in the property if not paid within a certain time frame. Jurisdictions have different regulations as they relate to tax lien certificates.

Michigan’s tax foreclosure auctions are a deed sale which transfers immediate and sole interest in the property to the buyer at the auction. Michigan does not utilize tax lien certificates in the foreclosure process.