Tax Certificates and Tax Deeds in Florida Real Estate
A quick overview of Florida real estate property taxes.
In Florida, the annual tax notice comes out in August. If you disagree with the assessed value of your property or anything else related to the tax, you have 15 days from that notice to dispute it. After that 15 days, you have to wait until the next one comes out the following August to file a dispute. The property tax bill arrives in November and offers a discount if you pay in November or December. This is when most people decide they want to dispute the bill, but by then, it’s already too late. The bill is due on January 1, but becomes past due on April 1. Homestead Exemption applications have to be filed prior to December 31 to be in effect for the following August. We’ll save Homestead Exemptions for another blog post.
If you fail to pay your property taxes by March 31, it becomes past due on April 1 and triggers the possibility of a Tax Certificate Sale.
County Tax Certificate Sales
Each county sells Tax Certificates to recoup overdue property taxes, usually by reverse auction (lowest interest rate wins). These auctions typically take place on the county tax or clerk website. Bidding usually starts at 18% and goes down from there. As a bidder, you are bidding the lowest interest rate you are willing to accept on the certificate. The final bidder pays the outstanding taxes and gets a Tax Certificate that earns the winning interest rate until it is paid in full or the property is sold. Tax certificates are one of the first things that Title Companies and Closing Attorneys look for when doing a title search. Tax sale dates vary by county, but are usually in the Spring (May/June).
It’s not uncommon for multiple certificates to be available for sale on the same property from multiple years. Certificates that are not sold are often offered by the county year-round until they are sold. Rural counties are more likely to have holdover certificates available with those lists typically being published on the County website for the Tax Collector or Clerk of Court.
(HOA common areas, utility easements and other easements frequently show up in tax sales because someone isn’t paying attention – these are not as exciting as they sound and can actually be a pain in the neck, so don’t bid blindly. I saw a beachfront lot in Sanibel once and got all excited until I realized that beach erosion basically meant more than half the lot was underwater and was unbuildable. I’ve also seen lakes, but if they’re landlocked with houses all the way around, you have no legal access to your lake without an easement, so you have a big liability pit with no ingress/egress, so again, don’t bid blindly – research the property before you bid.)
How a Tax Certificate Becomes a Tax Deed
Once the Certificate is sold and becomes 2 years old, the investor can request a Tax Deed to force repayment of their investment. You have the right to request it, but are not required to request it – you can simply let the certificate continue earning interest. Once a Tax Deed is requested, the county then advertises the sale, sends notices to the property owner of record, and the owners of all properties that border the property to be sold to give everyone a chance to save the property. Bidding starts at the full balance due of the tax certificate plus the county’s fees/costs for advertising and conducting the sale. The county may require the Tax Certificate owner to pay the advertising fees up front and be reimbursed by the sale.
The Tax Deed Sale can take place online, at the County Office, or the County Courthouse – it varies by county. If there’s a mortgage on the subject property, expect the bank to buy it, no matter what the cost (typically unless someone really messes up and they somehow miss it). Once it’s sold, the tax certificate owner who requested the tax deed sale is repaid their original investment plus the prorated interest on the tax certificate. If nobody bids, the tax certificate holder typically gets the deed by default (unless the county wants it for some reason). In this sense, your investment is backed by real estate, and the county assists you in recouping your investment plus the applicable interest. I wouldn’t call it a ‘guaranteed investment’, but it comes pretty close.
The highest bidder at the auction receives a Tax Deed, and actually now owns the property – likely free of all mortgages and liens except for IRS liens and certain municipality liens. (Caution, you also potentially own code enforcement fines as well if the yard wasn’t maintained, the property was a neighborhood eyesore, etc). The Tax Deed owner also has the right to take possession of the property, evict the previous owner or tenant, etc… but they’ll likely have to be a great negotiator or hire an attorney in most cases.
As a general rule, homesteaded properties are tougher all around. Vacant land lots with actual road frontage or a legal easement are the easiest; just check zoning to make sure you don’t need multiple lots in order to build. Also check for environmental hazards like scrub jay zones, wetlands, etc… Do your own research, preferably before you buy the first certificate.
Tax Deed Means Actual Ownership of the Property
With Tax Deed in hand, you can then sell the property via Special Warranty Deed – (meaning you are only guaranteeing the deed since you acquired the proper) or by Quit Claim Deed (you guarantee nothing except the transfer of your ownership rights). Most buyers want a Warranty Deed since it is the easiest to resell, the previous two likely involve selling at a significant discount versus Warranty Deed. The only way to convert your Special Warranty Deed is to either wait the statutory amount of time (multiple years), or file a ‘Suit to Quiet Title’ where you basically sue the previous owner so they execute a warranty deed or similar, or nobody responds to the suit, and you win by default. A suit to quiet title can take 6-18 months to finalize. Depending on the attorney, a suit to quiet title can cost several thousand dollars, or more if it’s complicated, as might be the case with probate, multiple owners or heirs, out of state parties, etc…
It’s an interesting process, and there are plenty of gurus out there selling courses to teach you how to ‘invest in real estate with guaranteed interest’, ‘get the county to guarantee your investment’, ‘buy a property for the cost of the taxes’, etc..
Tax Certificates and Tax Deeds are a fully public process and system, most people just don’t realize it exists. It’s a decent way to make double-digit interest on your money with a 2-year return horizon (typically). By the way, if the tax certificate you bought also had a tax certificate sold in years prior, that investor can force a tax deed sale before your year or two years is up, which could shorten your investment period, but you still get the pro rata interest for the time your money was tied up.
Exercise Caution When Buying Tax Certificates and Tax Deeds
While some people see this as a simple way to make guaranteed returns, you absolutely want to do your research. You will likely scour tax certificate sales for several counties including dozens, if not hundreds, of properties before you find a property that you might conceivably want to end up owning. Hedgefunds got into the game during the last downturn, so there’s typically competition in most auctions so 18% interest is the exception rather than the rule. However, most of those investors bid blindly and just assume a certain number of them will be unrecoverable.
Sometimes, taxes are past due for a reason. Keep in mind that an owner may have stopped paying the taxes simply because they were tired of paying taxes on a property that is unbuildable, is basically swamp, or otherwise not worth the annual expense. Caveat emptor definitely applies.
Tax Certificate and Tax Deed Resources
Here are some websites you can use to further your knowledge of Tax Certificate Investing and Tax Deeds:
(clicking a link will open a new window)
State of Florida Public Records Check – Including Abandoned Property and Unclaimed Property Searches
https://www.stateofflorida.com/public-records-check
List of Florida Counties:
https://www.stateofflorida.com/florida-counties
Duval County Tax Deed Overview
https://www2.duvalclerk.com/departments/tax-deeds
Duval County Tax Deed Sale Site
https://www.duval.realtaxdeed.com
Saint Johns County Tax Deed Overview
https://stjohnsclerk.com/public-sales/tax-deeds-2
Saint Johns County Tax Deed Sale FAQ
https://sjctax.us/tax-certificate-sales
Saint Johns County Uses a Third Party Auction Site for Tax Deed Auctions
https://www.zeusauction.com
If you have a specific question about tax certificates or tax deeds,
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