Does the Tax Lien Always Take Precedence?

In the majority of counties throughout the United States, when you purchase a property through a tax deed sale or gain the deed via foreclosure after a tax lien certificate default, the lien levied by the county is given first priority. That’s what makes tax lien certificate and tax deed investing so safe and secure. You always get something in return for your investment, whether it’s a hefty interest rate or the property itself. But in a few cases, other liens might challenge your exclusive right to the property.

A state lien may take precedence over a county tax lien. Such is the case in Arizona, where state liens and encumbrances are “superior to all other liens and encumbrances”. That is why researching the properties offered at a tax lien certificate auction is so vital. It’s probably best that you don’t bid on a property that is encumbered by a state lien but then again, if you can get the parcel cheap enough, it might be worthwhile to go ahead and purchase it and pay off both liens. Do be aware, however, that the real estate market has still not recovered in Arizona so property values are not at their optimum right now.

Generally a federal tax lien on property is given first position over any other liens. The IRS wants their money at any cost, as we all know, and since it is a federal agency, they are usually top dog.

The good news is that property tax liens nearly always take precedence over mechanic liens or mortgage liens.

Laws change all the time so be sure you carefully each county’s tax lien certificate sale rules before bidding. Every if you’ve been bidding at auctions for years, you should never assume that the regulations haven’t changed. Remember, the most successful investors that never overlook doing their homework.