Tax deed properties and tax lien properties are similar in many aspects, but it's important to note that they are not one and the same. When you win the bid on a tax lien property, there is a waiting period involved and what happens next is dependent upon the actions of the delinquent owners. If they are able to pay their back taxes in the allotted time, you receive monetary gain in the form of interest and fees. If they fail to redeem the property, you acquire real estate. By contrast, when you are the winning bidder at a tax deed auction, you acquire full and legal ownership of the property as soon as you pay the county. The previous owner does not have the opportunity to regain the property. Whether one, both, or neither of these type of auctions is available varies from state to state and even county to county.

Tax deeds can be a great investment if you're willing to do a little research, and they allow you to bypass the waiting game inherent to tax liens. Today's market abounds with homes, commercial properties, and lots available for you to buy and then sell, rent, or build upon. The most important thing to remember is don't bid blind. Undertake the necessary background information so you can feel confident in every investment decision you make. Some lots are too small to build upon successfully. Some homes will demand more in repair than is ultimately worthwhile. It is generally wiser to spend the money upfront on a high quality, higher priced property than to bid low and then have to pour money into the property to bring it up to code standards.

Seeing is Believing

Nothing substitutes a personal, visual inspection of a property before you attend an auction. You'll gain an invaluable understanding of the state of the property as well as the surrounding neighborhood.  Believe it or not, there are plenty of investors out there who will head blithely to an auction without having done even the bare minimum of investigation. You can outsmart these naive investors by taking the time to educate and inform yourself.

The ability to compare and contrast between properties is vital to the successful tax deed investor. If you win a bid, you are immediately going to acquire ownership of that property. Today's market is especially flooded with homes. You need to look for a marketable property, located in an area where sales are steady, versatile enough to either lease or sell.

What to Avoid

Avoid getting your heart set on one particular property weeks before the auction. Auction inventory can change from day to day in the time leading up to the sale, as some owners manage to pay their back taxes just in time. Check the status of the properties you're considering on a regular basis up to the date of the auction so you don't drive out there only to discover that none of the homes you were interested in are available for bid.

Although it's not usually the case, it is possible for tax liens to be held over the house on top of the tax deed. If a tax lien does exist and is upheld legally after you have won the bid for a deed, you will not be in full ownership of the home, making it more difficult for you to foreclose and make a profit. You especially want to avoid IRS tax liens. If a house is burdened by such a lien, your chances of fully acquiring the property are pretty dismal.
Both tax liens and tax deeds can prove to be outstanding investments, but the demand different methods for success. 

Article provided by Buzzle.com

For information on tax deed sales visit www.taxdeedlists.com, a one stop site for resources and monthly listings of tax deed auctions.