Buying a Home at Auction

What Is the Difference Between A Mississippi Tax Lien & A Louisiana Tax Lien?

For investors, buying a home at auction can often bring tremendous profits, especially if you’re able to secure an exceptional value for the property. However, there are a number of different methods that an investor can use to purchase a home at auction or make a profit off of a home that will soon be purchased at auction. And knowing the differences between these options can help investors make a better-informed decision when trying to make a profit on a property.

For instance, one of these options would be to purchase a tax lien. However, it is important to remember that a Mississippi Tax Lien has different requirements than a Louisiana Tax Lien.

What Is a Tax Lien in Mississippi?

In the state of Mississippi, a tax lien sale is a process in which an investor does not purchase a physical property. Instead, they purchase a bank lien on the unpaid taxes that had caused the auctioned property to go into foreclosure. Now, you may ask, “Why would I purchase a tax lien instead of the property?” To put it simply, you’d purchase a tax lien because there is a good opportunity to generate a strong profit once the house is auctioned and sold.

For investors who purchase a tax lien sale, you would have just purchased an interest-bearing investment that forces the auction buyer to pay an 18% annual return that must be repaid within two years. So, once that home sells at auction, the new owner is responsible for paying back the tax lien to you, plus interest. If the debt and interest are not paid within the two-year window, you will become the sole owner of the property.

Read more about the Mississippi tax lien process.

What Is a Tax Lien in Louisiana?

In the state of Louisiana, an adjudicated property is also open to a tax lien sale, however, the investor does not purchase a tax lien, they purchase a tax title. This tax title is also an interest-bearing investment that carries a 5% penalty and a 12% annual return for the owner that must be repaid within three years.

If the debt is not repaid by the owner within three years, the tax title investor will be responsible to pay the full cost of the property taxes owed to the government at that time in order to be granted full ownership of the property.

Read more about the Louisiana tax lien process.

So, What Should I Do? Buy a Home at Auction? Invest in a Tax Lien?

That choice is yours alone to make! While purchasing a house at auction would still require you to pay the property taxes, you are also investing in physical property. Tax liens allow investors to make a low stakes investment, but the potential to lose the house is large if the new owner pays off all owed taxes.

Each option carries its own risks and rewards, pros and cons, and benefits and problems. That’ll be up to you to decide! What are your thoughts? Be sure to comment down below and share your insight with our community.