The main difference between the two is that with a tax lien certificate an investor is purchasing the right to collect the taxes and place a lien on a property, while with a tax deed, an investor is actually purchasing the property, by virtue of a tax deed for unpaid real property taxes, at auction. Paying property taxes is an inevitable expense. Local communities have various programs including schools, law enforcement, and park departments that rely on these taxes. Even if you do not use any of these facilities you still must pay property taxes. If for some reason you do not pay your property taxes, the community will auction off any outstanding tax bills to investors through a tax lien certificate. Those investors can then earn a return on their investment by collecting accrued interest income. In some cases, they can take title to the property. It is very important for you to understand how tax lien certificates work.

Tax Liens

A tax lien is a lien that is imposed upon a property by law in order to secure the payment of taxes. Tax liens are serious. If you have a lien on your home or property, you probably haven’t paid all your federal, state, or community taxes. Liens don’t lead to property seizure right away, but they’re only one step away from levies—and levies mean business. A levy is a legal seizure of your property to satisfy a tax debt. One of the first things that will happen is there will be a tax lien against your real property. This tax lien is the first position lien for unpaid real estate taxes and gets priority preference over any other liens on your property, including your mortgage. You will not be able to sell your property without first paying any outstanding liens.

Tax Lien Certificate

A tax lien certificate is created when a property owner has failed to pay their taxes and the local government issues a tax lien. The certificate shows the taxes that are owed along with any interest and penalties. Tax lien certificates are typically auctioned off to investors looking to profit. According to Florida statutes, on or before June 1, a tax certificate sale must be held. This is a public auction held by the tax collector where a tax certificate is sold to the party who will pay the property owner’s tax and accept the lowest interest rate when redemption of the delinquent taxes is made. The investor who offers the lowest bid will then be awarded the tax lien certificate. Once a tax lien certificate is awarded, the winning investor will step in and pay the past due real estate taxes owed, as well as any interest, and cost of fees owed. The tax lien certificate will be issued and will continue to accrue at the applicable interest rate until paid. If the property owner opts to redeem the tax lien certificate, the property owner will be required to all outstanding costs, interest, and fees. Once the payment is received by the tax collector’s office, the investor will collect the money and the applicable county will cancel the tax lien certificate, which will cancel the tax lien on the property. Florida is a great state for tax lien investing. For example, Florida’s maximum interest rate is set at 18% while Arizona’s maximum rate tops out at 16%. Property tax liens can be a viable investment alternative for experienced investors familiar with the real estate market. Those who know what they are doing and take the time to research the properties upon which they buy liens can generate substantial profits over time.

Tax Deed

If the tax debt remains unpaid for two years after the tax lien certificate is issued, the tax lien certificate holder may file for a tax deed by completing and submitting a tax deed application with the governing county’s tax collector office. Once a tax deed application has been filed, in order to stop the tax deed process, the property owner must pay for the past due real estate taxes owed, as well as any fees and accrued interest owed in connection with the past due real estate taxes. If the owner of the property does not pay, the property will eventually go to public auction. After the requisite period of time has expired, the tax lien investor can then submit a tax deed application and then have the subject property sold at a public auction. Once the deed has been issued, any right of the property owner to redeem the tax lien certificate and get back the property has been lost. A tax deed is a legal document that transfers ownership of a property when a home has gone to auction. Tax deed sales are auctions that occur when homes are offered for sale to recoup the tax bill by the tax collector. If you’re interested in buying tax deeds in Florida, you can find auction announcements and lists of tax deed properties published in the local newspaper and on the county’s website. Anyone can attend these auctions, though, at some venues, you may be required to prove that you have the funds to bid.

A real estate attorney can help homeowners if they are facing losing their homes to a tax deed sale or help investors or real estate purchasers who are considering purchasing properties at tax deed sales. If you are a homeowner who has not been able to pay property taxes, the county in which you reside may place a tax lien on your home. According to the Florida Bar, Florida counties can sell your home in a tax deed sale if taxes on your property go unpaid for two years. If you are an investor considering purchasing tax deed property or land, you’ll want to take steps to protect your legal rights. Tax deed investment can come with many benefits, but also additional responsibilities. Tax deed sales can be more complex than purchasing land or property outright.


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Helping clients with real estate, commercial real estate transactions, residential property purchases and sales, estate planning, and more! Skillful legal representation can simplify complex real estate transactions and solve problems that frustrate all parties involved. At the Estevez Law Group, P.A. our boutique real estate law firm and title agency assists clients with all types of residential and commercial property matters.
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