Tax Deed
A deed issued to the winning bidder at a tax deed sale — transferring ownership of a property seized for unpaid taxes.
Definition
A tax deed is the document a government issues to the buyer at a tax deed sale, conveying ownership of a property whose owner failed to pay property taxes. In tax deed states, the government forecloses on the property and sells it — the winning bidder receives title directly.
Tax deed auctions often produce significant discounts because bidders buy without interior inspection and sometimes with clouded title histories. However, the deed itself is generally conveyed free of prior liens (including mortgages) in most states — making it a clean acquisition once the redemption period passes.
Tax deed and tax lien investing are distinct strategies. In lien states, investors buy the right to collect the taxes (plus interest); in deed states, investors can ultimately acquire the property. Some states use a hybrid system. Research your target state's laws thoroughly before participating in any tax sale.
Related Terms
Tax Lien
A government claim against a property for unpaid property taxes — investors can purchase these liens and earn interest.
Foreclosure
The legal process by which a lender repossesses a property when the borrower defaults on the loan.
Due Diligence
The investigation and verification process buyers conduct before committing to a real estate purchase.
Title
Legal ownership rights to a property — the bundle of rights that come with owning real estate.
Deed
A legal document that transfers ownership of real property from one party to another.