Tax Lien vs Tax Deed vs Redeemable Deed: What I Learned Running All Three
About this article: “Marcus” is TaxLienSimple's educational narrator. First-person stories and dollar examples are illustrative scenarios written to explain real tax-sale concepts — they are not the personal trading history of a specific investor. Rate and legal information is sourced separately to official statutes and government records (see About and each guide's citations).
TL;DR
- →There are three systems, not two: lien states pay accruing interest, deed states hand you the property outright, redeemable-deed states (like Texas) sell you the property with a flat penalty if the owner buys it back.
- →I run all three. Each has a different risk-and-payout shape.
- →Texas isn't a lien state - it's a hybrid, and confusing the two will wreck your math.
The Fundamental Difference
Lien states (Arizona, Colorado, Florida's certificates): you pay the delinquent taxes and earn interest that accrues over time, bid down from a statutory ceiling. Deed states (California, Nevada): you bid on the property outright, no redemption, you own it the moment you win. Redeemable-deed states (Texas, Georgia): you also bid on the property, but the former owner keeps a window to buy it back from you by paying a flat penalty on top - 25%/50% in Texas, 20%/10% per year in Georgia. It's a genuinely different animal from both of the others.
My Time in True Lien States
In Arizona I've averaged solid, if unspectacular, bid-down returns - real accruing interest, exactly like the textbook describes. Deed investors in states like California were buying properties at forced-sale discounts instead.
What Deed and Redeemable-Deed States Offer
In Florida (deed) I bought a property for $8,400 appraised at $85,000 and sold it for $72,000 after the redemption window - wait, Florida runs both certificates and deeds depending on the sale, so know which one you're in. In Texas (redeemable deed) my upside is different: either a fast flat 25% premium if the owner redeems, or the property itself at a discount if they don't.
Marcus Field Notes
I run all three now. True liens for defined accruing income. Deeds for straight-up acquisition upside. Texas-style redeemable deeds for the fastest payout when they redeem. Take the Lien vs Deed Quiz to see which fits your goals.
Frequently Asked Questions
Common questions about the difference between tax liens, tax deeds, and redeemable deeds.
Frequently Asked Questions
What is the difference between a tax lien and a tax deed?↓
A tax lien is a claim against a property for unpaid taxes: in lien states (Arizona, Colorado, Florida's certificates) you pay the delinquent taxes and earn interest bid down from a statutory ceiling until the owner redeems. A tax deed sale sells the property itself: in deed states (California, Nevada) the buyer owns the property once the sale is final.
Is Texas a tax lien state or a tax deed state?↓
Neither, exactly. Texas is a redeemable-deed state: you bid on the property itself, but the former owner keeps a redemption window and can buy it back by paying the taxes plus a flat premium - 25% in the first year, 50% for homesteads in the second (Tex. Tax Code 34.21). That premium is a penalty, not interest, which is why Texas returns look different from lien-state returns.
Which is better for a beginner: liens or deeds?↓
Lien certificates generally put less capital at risk per purchase and pay a defined rate while the owner redeems. Deed sales can offer acquisition upside but usually require more due diligence and, in some states, quiet-title work. Many investors run both - and Texas- and Georgia-style redeemable deeds are a middle path.
Do I own the property immediately at a tax deed sale?↓
In true deed states (like California and Nevada) ownership transfers at the sale, though California sales are subject to court confirmation. In redeemable-deed states (Texas, Georgia) the former owner keeps a redemption window, and the property is yours free and clear only once that window expires without redemption.
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