Investing in Maryland Tax Sales: A Complete Guide

Sale Details

Maryland Tax Lien
Varies; Majority May-June

Redemption

6 Months

Bid Procedure

Liens – premium bid/ sold to highest bidder
some counties use a sealed bid process

Number of Counties: 24

Useful Links

Maryland Department of Assessments and Taxation (SDAT)
Montgomery County Tax Sale Information

Investing in Maryland tax sales is a great way to earn good returns while helping local governments collect unpaid property taxes. Whether you’re new to tax liens or have some experience, it’s important to know how things work in Maryland. In this article, we’ll explain the tax sale process, how tax lien certificates work, and why Maryland is a top choice for tax lien investors. From the auction steps to the potential earnings, this guide covers everything you need to succeed in Maryland’s tax lien market.

Understanding Maryland Tax Sales

In Maryland, a tax sale is conducted when property taxes remain unpaid for a certain period. These unpaid taxes result in a tax lien, which the local government can auction off to recover the owed amount. Here’s a breakdown of how it works:

What is a Tax Lien?

A tax lien is a legal claim by the government against a property due to unpaid taxes. In Maryland, tax liens are sold as “tax lien certificates” during public auctions.

Federal vs. State Liens: The IRS issues federal tax liens, while Maryland’s Comptroller issues state tax liens. A tax lien can attach to various assets, including future acquisitions, and may impact credit, loans, and employment opportunities.

Impact on Property Ownership: Purchasing a tax lien certificate does not transfer property ownership immediately. Instead, it gives the investor the right to collect the debt and potentially foreclose on the property if the debt remains unpaid.

How the Tax Sale Process Works in Maryland

When a property owner fails to pay their taxes, the local government initiates a tax sale, offering tax lien certificates to the highest bidder at a public auction. The sale process varies slightly between counties but generally follows these steps:

1. Sale Schedule

Maryland conducts annual tax sales, typically scheduled by individual counties. For example:

March: St. Mary’s County

May: Allegany, Baltimore City, Caroline, Charles, Frederick, Garrett, Howard, Kent, Prince George’s, Queen Anne’s, Talbot, Worcester

June: Anne Arundel, Calvert, Carroll, Cecil, Dorchester, Harford, Montgomery, Somerset, Washington, Wicomico, Baltimore

Each county may conduct its auction in a physical location or online. For instance, Montgomery County holds its sale at the Division of Treasury in Rockville.

2. Interest Rates on Redemption

The interest rates in Maryland are highly variable, ranging from 6% to 20% annually, depending on the county. For example:

Montgomery County: 20%

Howard County: 18%

St. Mary’s County: 6%

This interest is payable upon redemption, making Maryland’s tax liens particularly attractive for investors seeking strong returns.

3. Bidding Process

Unlike some states where bids are based on the interest rate, Maryland’s tax lien certificates are sold to the highest bidder. Some counties may use a sealed bid process, which can add a strategic layer to the bidding.

4. Redemption Period

After the sale, property owners have a limited time to redeem their property by paying the owed taxes plus interest. During the first four months, the certificate holder cannot initiate foreclosure, but the redemption amount increases over time due to accruing fees and interest.

Foreclosure Rights: If the property owner fails to redeem, the certificate holder can start foreclosure proceedings after six months. The deadline for initiating foreclosure is two years from the date of the sale.

Why Invest in Maryland Tax Sales?

Maryland offers a combination of benefits that make it an attractive state for tax lien investors:

1. High Return on Investment

With interest rates up to 20%, Maryland tax lien certificates can offer high returns compared to other states. The varying interest rates across counties allow investors to choose where to invest based on their return expectations.

2. Legal Protections

The process in Maryland is well-regulated, providing clear guidelines for both the property owner and the investor. This legal clarity helps reduce the risks associated with tax lien investing.

3. Diverse Investment Opportunities

Each county in Maryland offers different terms and rates, providing a range of opportunities for investors to diversify their portfolios. Whether you prefer a higher interest rate or a shorter redemption period, Maryland has options to suit different investment strategies.

Pro Tips for Maryland Tax Lien Investors

1. Research Thoroughly: Always perform due diligence before bidding. Check the property’s condition, zoning laws, and any existing liens that may complicate foreclosure.
   
2. Start Small: If you’re new to tax lien investing, start with a small investment to learn the process before scaling up.
   
3. Attend Auctions: Whether online or in person, attending auctions allows you to get a feel for the competition and strategies used by other investors.

Frequently Asked Questions (FAQs)

1. Q: How do I know when a tax sale is scheduled in a specific county?
   • A: Each county in Maryland sets its own tax sale date. You can find this information on the county’s website or by contacting the County Treasurer’s office.
     
2. Q: Can I lose money on a tax lien investment?
   • A: Yes, if the property owner fails to redeem and the property cannot be sold at a profit during foreclosure, you could lose money. However, thorough research and selecting liens with favorable terms can mitigate this risk.
     
3. Q: Can foreign investors participate in Maryland’s tax sales?
   • A: Yes, Maryland allows both domestic and international investors to participate in tax lien auctions.

Conclusion

Maryland tax sales offer an excellent opportunity for investors looking to earn high returns with manageable risks. With proper research and strategic bidding, investing in Maryland’s tax lien certificates can be a lucrative addition to your investment portfolio. Don’t forget to perform due diligence and understand the specific rules of the county where you plan to invest.

Ready to start your journey into Maryland tax lien investing? Get in touch with us today for expert advice and take the first step toward a potentially profitable investment!