Tax Lien Certificates are basically the proof of purchase that you receive when you participate at an annual county tax lien sale. These sales offer investors an opportunity to purchase the right to collect past due real property taxes. They are offered by the government to which the taxes are owed. Tax Lien Certificates, not to be confused with tax deeds, place an encumbrance on the real property and, in most cases, take priority over all mortgages and mechanic's liens, but not state taxes.
Public Auction States
As of the beginning of 2010, the following U.S. states allow their county governments to hold public auctions that issue tax lien certificates: Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, South Carolina, South Dakota, Vermont, West Virginia, Wisconsin and Wyoming.
Additionally, Washington D.C., also issues its own tax lien certificates.
Some states allowed their counties to offer tax lien certificates via a process called over-the-counter, or negotiated sales which is by mail order. The tax liens not sold at auction are also offered in this manner. Those states are: Alabama, Alaska, Arizona, Arkansas, Colorado, Florida, Maryland, Mississippi, Montana, Nebraska, New Jersey, North Carolina, North Dakota, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas and West Virginia.
There is a small handful of states that allow their counties to offer tax lien certificates over the internet. They are Arizona, California, Colorado, Florida and Indiana.