Tax Lien Transfer Information

How Property Tax Lien Transfers are Beneficial:

The property tax lien transfer industry benefits property owners, taxing units, and lienholders.

Property Owners

A unique feature of Texas’ tax lien transfer industry is how involved the property owner is in the process. In other states, individual investors simply purchase tax liens directly from the county and then inform the property owner of the transfer. In Texas, however, the property owners get to choose the company with which they will enter into a repayment agreement. The property owners also benefit in the following ways:

• Property owners stop the accruing of significant penalties, fees, and interest charges from the county (which can exceed 44% in the first year of delinquency)
• Owners obtain more flexible repayment terms than the options allowed by the county.
• Foreclosure and lawsuits can be avoided.
• No large down payment is required (compared to the county’s 10-33% down payment requirement)
• Property owners obtain a sense of relief and peace of mind that their property taxes are paid in full.

Taxing Units

Local governments benefit from tax lien transfers in the following ways:

• Otherwise delayed revenue is immediately collected for the school district, county, Municipal Utility District (MUD), hospital district, etc.
• State jobs are preserved as more money is readily available for salaries.
• Local governments do not have to incur the internal costs associated with outsourcing accounts to collection attorneys.
• Local neighborhoods are preserved because property owners are less likely to lose their property to county foreclosure.
• Private sector jobs are preserved as business property owners are less likely to lose their property to county foreclosure.
• The tax collectors maintain positive relationships with constituents because they do not have to penalize the constituents for their tax obligation with penalties, interest, and possible foreclosure.

Other Lienholders

The property owners and the counties are not the only stakeholders with an interest in tax lien transfers. Preexisting first lien holders, whose loan-to-value ratios are generally much higher than property tax transferees, also benefit by property owners entering into repayment agreements with tax lien transferees. The preexisting lienholders benefit in the following ways:

• The property owners are given the freedom of more affordable payments making it less likely that they will default on either their mortgage or their property tax repayment plan.
• The tax lien transfer stops the accruing of penalties that the lien holder would potentially have to pay to the county if the taxes were left delinquent (i.e., the cost of a tax lien transfer is usually much less than the cost of non-payment of taxes by the property owner).
• It is less likely that the property will face foreclosure, which would likely cost the lienholder time and money.