Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Tax Sale

What it is:

A tax sale is a sale of property by a taxing authority.

How it works (Example):

For example, let's say that John owns a home and he owes $4,000 in property taxes. A year and a half goes by, and John doesn't pay the taxes. If he is unwilling or unable to pay his taxes after a certain amount of time, the taxing authority will seize his property and sell it in a tax lien foreclosure. The taxing authority uses the proceeds from the sale to pay the taxes owed.

Why it Matters:

Tax sales almost always involve real estate, and they're almost always used for recovering unpaid taxes. An entire cottage industry has sprung up around tax lien sales because the taxing authority is generally able to sell the properties for little more than the amount of taxes owed.