Tax lien vs tax deed states: what it means for your list
By Josh MillerUpdated 4 min readIn tax lien states, the county sells an investor a lien on the unpaid taxes and the owner keeps the house while the redemption period runs; in tax deed states, the county sells the house itself, sometimes with a short period for the owner to buy it back. Either way, the owner behind on taxes is a lead before the sale, and in the county records owners 2 to 4 years behind sold off-market at about 3 of every 100 within a year.
An owner who stops paying property taxes doesn't lose the house overnight. What happens next depends on the state, and it changes who you're competing with and how long the owner has to decide.
The two systems
Tax lien states sell a lien. An investor pays the county the delinquent taxes and gets a certificate that earns interest. The owner keeps the house and can redeem by paying the certificate off. Only if the redemption period runs out can the lien holder take the house. Florida, Arizona, Illinois, New Jersey and Colorado work this way.
Tax deed states sell the property itself at auction. Some give the owner a period to buy it back after the sale: Texas gives a homestead owner two years, and Georgia generally gives twelve months. California sells the property outright, with no redemption after the sale.
The 2023 Supreme Court ruling
In Tyler v. Hennepin County (2023), the Supreme Court ruled unanimously that a county can't keep the money from a tax sale beyond what the owner owed. A Minnesota county had sold a condo for $40,000 to cover about $15,000 in taxes and kept the rest. The Court called that a taking. Several states have since rewritten how they handle the surplus, and in some states the owner, or the owner's heirs, can now claim it after a sale.
What it means for your list
In both systems, the owner behind on taxes owns the house until the sale and can sell to you, paying the back taxes at closing. That's the window to work. How long it lasts is the difference:
- Tax lien states: the redemption period can run years, so the owner often feels no deadline. Expect slow decisions.
- Tax deed states: the auction date is the deadline. Owners closer to it are closer to a decision.
What sold
| List | Of every 100, sold | Any house, at random | Counties |
|---|---|---|---|
| Behind on taxes, 2 to 4 years | 3.1 | 1.5 | 479 |
| Behind on taxes, 5 or more years | 2.9 | 1.5 | 233 |
Source: GoForClose count of off-market, arm's-length deeds in county records. Lists as they stood in the October 2024 to March 2025 window, counted over the next 12 months.
Tax lists sold better than a random house, and well behind the filings: a foreclosure filing sold at about 13 per 100 and an expired listing at about 12. Owners further behind didn't sell faster. Five or more years behind sold at about the same rate as 2 to 4 years, which suggests the long-delinquent owners have settled into it.
How to work it
- Know your county's sale date. In a tax deed state, the months before the auction are when owners decide.
- Mail across the year. Tax lists sit there; nothing in the record tells you when this owner will move.
- Stack it with a filing. An owner behind on taxes who also has a foreclosure or a lien filed is a stronger lead than either list alone. How list stacking works.
Questions investors ask
What is the difference between a tax lien and a tax deed state?
A tax lien state sells the right to collect the unpaid taxes plus interest, and the owner can redeem by paying it off. A tax deed state sells the property itself at auction, in some states with a redemption period after the sale.
What did Tyler v. Hennepin County decide?
In 2023 the U.S. Supreme Court ruled unanimously that a county that sells a house for unpaid taxes can't keep the sale money above the tax debt; keeping it is a taking under the Fifth Amendment. Many states have changed their tax sale rules since.
Are tax delinquent owners good leads?
Better than a random house, well below the filings. Across 479 counties, owners 2 to 4 years behind sold off-market at about 3.1 per 100 within a year, and across 233 counties owners 5 or more years behind sold at about 2.9.
Can I buy a house from an owner before the tax sale?
Yes. Until the sale, the owner owns it and can sell, paying the back taxes at closing. That's the window most investors work.