Tax Deed vs. Tax Certificate

Just like Subject To's vs. Assumptions, Tax Certificates vs. Tax Deeds fall under the category of terms investors use interchangeably, but really they are two different things. To know (and remember) the difference it’s helpful to also understand the basics of how the tax sale process works.

Tax Certificate:

When a property owner becomes delinquent on their property taxes the county issues a tax certificate for the owed amount. There are investors who are attracted to these certificates because they earn interest. When the owner finally remembers to pay their taxes they must pay the money owed to the county, and they also must pay all of the accrued interest owed to the certificate investor. The key point to take away here is that a tax certificate investor is entitled to earn interest in the investment,  but has no ownership interest in the property. 

Tax Deeds:

If after two years the property owner has not paid the amount owed to satisfy the certificate holder that certificate may be redeemed by the certificate investor. Once that certificate is redeemed, the clerk begins the tax deed sale process by running title and sending notice to all interested parties per statutory requirements. After all notice and statutory requirements are met by the clerk, the property is auctioned at the tax deed sale. When an investor purchases a property from the tax auction they receive a tax deed and now own the property. The bid amount goes toward satisfying the certificate holder and fees owed to the Clerk.


So the short answer to the difference between tax certificates and tax deeds is that owning a tax certificate gives you the right to earn interest on the certificate amount; whereas owning a tax deed means you actually have title to the property. 

If you're interested in more investing information like this follow our FaceBook page Richards Law Firm ,PA and join the Land Trust Investors Group. Don't just follow - participate in the discussion!


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