investing in tax liens

Investing in tax liens can produce high interest rates of return but has risks involved. Here is an overview of how tax liens work in Kane county Illinois.

When a property owner fails to pay his or her taxes, the municipality in which the property is located can sell its tax lien — the right to foreclose on a property when the owner has failed to pay taxes.

Investors buy the liens in an auction, paying the amount of taxes owed in return for the right to collect back that money plus an interest payment from the property owner. The interest rate in Kane county is set at 24% per year – a great return on money invested. The property owner has a redemption period of 21/2 years for residential property to pay the taxes plus interest.

If the property owner fails to pay the property taxes by the end of the redemption period, the lienholder can initiate foreclosure proceedings to take ownership of the property. But that rarely happens unless the property will likely have problems being sold because the owner or other investors would rather sell the property than let it go for the amount of the tax lien. The taxes are generally paid before the redemption date.

The interest rates make tax liens an attractive investment. Liens also are first in line for repayment, even before first mortgages.

 Kane County Tax Lien Auction

Kane County will hold its annual tax sale on Monday, October 30th, 2017.  The tax sale will start at 9 a.m.  It will be held at the Kane County Government Center, building (A), 719 South Batavia Avenue, Geneva, Illinois.  You must register to participate.  Registration will begin September 15th, 2017, and end October 13th, 2017. Registration entitles you to one (1) seat in the board room.  All registrations received before or after this time will be returned (no exceptions).

The county advertises delinquent taxes in local newspapers approximately three (3) weeks prior to the sale.  A $500 deposit is required for registration, ($450.00 being applied toward any items purchased at the sale and $50.00 toward the cost of the tax sale list).  New tax buyers must pay this deposit with certified funds.  You must be physically present to participate at the sale.

More Tax Lien Investment Information

If you win a lien at auction, you must learn your responsibilities. For example, in Illinois, within four months of purchasing a lien, you’re required to notify the property owners that you possess the lien and can foreclose if they don’t repay,  Then another letter must be sent before the end of the redemption period.

Tax liens also have an expiration date. At that point, the property owner has probably already lost the right to the property. But any rights held by the lienholder expire when the lien has expired.

After you’ve bought a lien, you may want to pay taxes on the property in the years that follow, so no one else can purchase a lien and thus have a claim on the property. That would mean you’d have to place another lien on the property.

Tax lien auctions can be held on the Internet or in person and work in several different ways, depending on the municipality.

One is known as bidding down the interest rate. The municipality establishes a maximum rate, and the bidder asking for the lowest interest rate beneath that maximum wins the auction.

Another variation involves bidding a premium on the lien. The bidder who offers to pay the highest premium above the lien amount wins the auction. The premium can earn interest and may be paid back to the lienholder at redemption, but not always.

Know The Property

You have to understand what you’re buying. Be aware of what the property is, the neighborhood and values, so you don’t buy a lien that you won’t be able to collect.” You want to avoid properties with environmental damage, such as one where a gas station dumped hazardous material.

Is There A Safer Way To Invest In Properties With Tax Arrears?

People who are behind in their taxes know they are in trouble. They are often anxious to sell their home and may accept a very good price to solve their problem. Some investors work with Realtors to find these properties and offer to purchase them. Some investors negotiate an option to prchjase and then sell the property to a buyer for a profit during the option period. If you would like to work with me to find great investment properties, call Tony Delisi at 847-471-7177. The cost to use my services is paid for by the seller. It is free to you.


Please note that participating in the sale involves significant risk.  The tax sale procedures are outlined in the Illinois Compiled Statutes, Chapter 35 Act 200.   If you need advice please contact an attorney specializing in tax sale procedures.