Tax Lien Sale - Redemption Process

Redemption Process

The investor must wait a specified period of time (referred to as the "redemption period"), during which time the lien (plus interest and any other fees) may be repaid. Usually the lien holder is not permitted during this period to contact the property owner (or anyone else having an interest in the property, such as the mortgage holder) to demand payment or threaten foreclosure, or else the certificate can be forfeit.

In some jurisdictions, the lienholder must agree to pay subsequent unpaid property taxes during the redemption period in order to protect his/her interest. If the lienholder does not pay such taxes, a subsequent lienholder would "buy out" the prior lienholder's interest.

Once the redemption period is over, the lien holder may initiate foreclosure proceedings. The proceedings (the costs of which must be paid by the lien holder, though a redeeming property owner may be required to pay them as part of redemption) may result in either acquiring title to the property (normally this will be in the form of a quitclaim deed) or a tax deed sale of the property where the lien holder has the right of first bid (and may participate by making additional bids if s/he so chooses). In Illinois a "Tax Deed" delivers a clean title as the court removes all clouds on title in the order directing the issuance of the deed. During the period between the initiation of proceedings and actual foreclosure, the property owner still has the opportunity to repay the lien with interest plus the costs incurred to foreclose.

If the lienholder does not act within a specified period of time, as defined by state law, the lien is forfeited and the holder loses his investment. This period of time ranges anywhere from 7 to 10 years and cannot be extended unless the taxlien is officially in the process of a tax deed application of Judicial Foreclosure.

A lien issued in error of state law is repaid, but usually at a far lower interest rate than had the lien been valid.