Question 1

What is the difference between a tax deed state and a tax lien state?

Accepted Answer

In a tax deed state, the government sells the actual property to recover unpaid taxes — the buyer gets ownership. In a tax lien state, the government sells a certificate (lien) for the unpaid taxes — the buyer earns interest and can eventually foreclose if the owner doesn't pay. Some states are hybrid, offering both mechanisms.

Question 2

Which states are tax deed states?

Accepted Answer

Major tax deed states include Texas, California, Michigan, Pennsylvania, New York, and Nevada. These states sell the property itself at tax sales, giving the buyer a deed (though title may need to be cleared via quiet title action).

Question 3

Which states are tax lien states?

Accepted Answer

Major tax lien states include Florida, Arizona, Illinois, New Jersey, and Maryland. In these states, investors purchase tax lien certificates and earn interest rates that can range from 8% to 36% depending on the state.

Question 4

What is a hybrid tax sale state?

Accepted Answer

Hybrid states like Ohio and Colorado offer both tax lien and tax deed sales, sometimes depending on the county or the stage of delinquency. This gives investors multiple entry points for tax sale investing.

Question 5

What is a redeemable deed state?

Accepted Answer

Redeemable deed states like Georgia transfer ownership at the tax sale, but give the original owner a window (typically 12 months) to buy the property back by paying the purchase price plus a penalty (20% in Georgia). If the owner doesn't redeem, the buyer keeps the property.

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