Tax Lien Certificates vs Tax Deeds: Why Texas Is a Deed State
Tax Lien Certificates vs Tax Deeds: Why Texas Is a Deed State
Information, not legal advice. Laws change; check the current statute or rule and talk to a Texas attorney before you act.
National courses and books on "tax lien investing" describe buying a certificate, earning a high interest rate, and getting the property only if the owner never pays. That is how some states work. Texas does not sell tax lien certificates. It sells the property itself, by deed, after a court judgment, and the owner can buy it back for a set period. Knowing the difference keeps out-of-state playbooks from causing expensive mistakes in Texas.
Two basic systems
| Tax lien certificate | Tax deed | |
|---|---|---|
| What the buyer gets | A certificate: the right to be repaid the taxes plus interest or a penalty | A deed to the property |
| How bidding usually works | Bid down the interest rate, or bid a premium | Bid up the price |
| Who owns the house after the sale | Still the owner | The buyer (subject to any redemption right) |
| How the buyer gets the property | Only by applying for a deed or foreclosing after a waiting period | Immediately, or when redemption expires |
| Typical return | The interest the owner pays to redeem | The property, or the redemption premium |
Many states blend the two. A "redeemable deed" state gives the buyer a deed right away, but lets the owner redeem for a period by paying the price plus a premium. Texas is one of these.
How Texas works
- No certificate sale. Delinquent taxes are collected by the taxing units, usually through private law firms. There is no annual auction of liens.
- Tax suit and judgment. The taxing unit sues in district court to foreclose its tax lien. The court enters judgment and orders the property sold. See Texas delinquent tax suits explained.
- Sale by deed. A sheriff or constable sells the property at public auction on the first Tuesday of the month (Tex. R. Civ. P. 646a; Tax Code §34.01). A county may allow online bidding (§34.01(a-1)). The deed "vests good and perfect title" in the buyer, subject to the owner's right of redemption and certain recorded covenants and easements (§34.01(n)).
- Redemption. The former owner can buy the property back by paying the bid, the deed recording fee, taxes and costs the buyer paid, plus a premium (§34.21): - Homestead, agricultural-use land, or a mineral interest: up to 2 years after the deed is filed; premium 25% in year one, 50% in year two. - Everything else: 180 days; premium up to 25%.
See Redemption rights after a Texas tax sale.
- No bidder. If nobody bids enough, the property is "struck off" to the taxing unit and resold later (§34.05). See Struck-off properties and tax resales.
Texas also has a feature most certificate states lack: the property tax loan, where a licensed lender pays the taxes with the owner's consent and takes a transfer of the tax lien (Tax Code §32.06). That is the closest Texas comes to a private market in tax liens, and it is a regulated loan, not an auction. See Texas property tax loans.
What this means for investors
- No passive interest play. In Texas you are buying a property in a lawsuit-driven sale, not a yield-bearing certificate.
- Your return if the owner redeems is the premium, 25% or 50% on a homestead depending on timing, up to 25% on other property. Over a 180-day period that can be attractive, but you cannot count on keeping the house.
- Title is not automatically clean. The deed takes the defendant's interest. Liens and owners not joined in the suit may survive, and many buyers get title insurance only after redemption runs.
- Due diligence is on you. Sale lists give a cause number, legal description, minimum bid and adjudged value. You still have to look at the property, the judgment and the parties.
Which states sell certificates?
The table below summarizes systems as described by official or published sources reviewed in 2026. State law changes often; check before you invest.
| State | System | Key terms (as published) | Source |
|---|---|---|---|
| Florida | Tax certificates | Bids start at 18% and go down; annual sale by June 1; deed application after 2 years | Florida Stat. ch. 197; Hillsborough Tax Collector |
| Arizona | Certificates of purchase | Up to 16%, bid down; holder can foreclose after 3 years; February sale | Pima County Treasurer; ARS title 42 |
| New Jersey | Tax sale certificates | 18%, bid down to 1%, then premium bidding; each town runs its own sale | NJ Division of Local Government Services |
| Alabama | Lien auction or certificate sale, by county | Lien auctions at 12% bid down (GovEase) | GovEase Alabama overview |
| Mississippi | Lien sale | August sale, 18%, 2-year redemption | GovEase Mississippi overview |
| Missouri | Certificate sales by county | August sales, 10% maximum | Mo. Rev. Stat. §140.340 |
| Illinois | Certificates (Cook County in transition) | 2026 law moves Cook toward judicial deed auctions | Capitol News Illinois |
| Georgia | Redeemable deed | 20% premium in year one, 10% each later year; 12 months before barment | O.C.G.A. §48-4-42 |
| Tennessee | Redeemable deed | 12% a year; redemption shortened from July 1, 2026 | BillTrack50 summary |
| Nevada | Deed after 2-year trust period | No investor interest | NRS 361.570 |
| Arkansas | State land commissioner sells forfeited land | No post-sale redemption since July 2023 | Arkansas Commissioner of State Lands |
| Texas | Redeemable deed | 2 years (homestead/ag/mineral) at 25%/50%; 180 days otherwise, up to 25% | Tax Code §34.21 |
Surplus is treated differently too
When a Texas tax sale brings more than the judgment, the excess goes into the court registry and the former owner (and lienholders) can claim it for 2 years. Texas tightly limits who can charge a fee to recover it: a non-attorney may not, and an attorney's fee is capped at the lesser of 25% or $1,000 (Tax Code §34.04). See Excess proceeds from Texas tax sales. Nationally, the U.S. Supreme Court held in Tyler v. Hennepin County (2023) that a county that keeps surplus beyond the tax debt takes property without just compensation, which pushed several states to change their laws.
How this shows up in Agentix Data
We track posted Texas tax-sale, resale and struck-off listings (sale date, cause number, minimum bid, account) alongside tax suits and delinquent rolls in our covered counties, so you can follow an account from first delinquency to sale. We currently cover Texas only; we do not sell lien-certificate data for other states.
Sources
- Texas Tax Code ch. 34 (§§34.01, 34.04, 34.05, 34.21): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.34.htm and https://texas.public.law/statutes/tex._tax_code_section_34.21
- Texas Tax Code §32.06 (tax lien transfers): https://statutes.capitol.texas.gov/Docs/TX/htm/TX.32.htm#32.06
- Texas Rule of Civil Procedure 646a (first-Tuesday sales): https://www.courtrules.net/texas/texas-civil-procedure/rule-646a
- Tax Sale Resources, Texas "redeemable deed" state page: https://www.taxsaleresources.com/state/texas
- Hillsborough County Tax Collector, tax certificates (Florida): https://www.hillstaxfl.gov/taxes/tax-certificate/
- Leon County Tax Collector, tax deed timing (Florida): https://leontaxcollector.net/Services/property-taxes/Tax-Sale-Information
- Pima County Treasurer, tax lien sale (Arizona): https://www.to.pima.gov/taxLienSale
- New Jersey DLGS, Elements of Tax Sales: https://www.nj.gov/dca/dlgs/programs/tax_collector_docs/elements_of_tax_sales_nj.pdf
- GovEase, Alabama tax lien auction overview: https://govease.helpscoutdocs.com/article/97-alabama-tax-lien-auction-overview
- GovEase, Mississippi tax sale overview: https://govease.helpscoutdocs.com/article/130-mississippi-tax-sale-overview
- Missouri Revised Statutes §140.340: https://revisor.mo.gov/main/OneSection.aspx?section=140.340
- Capitol News Illinois, property tax sale reform (2026): https://capitolnewsillinois.com/news/property-tax-debt-sale-reform-will-allow-homeowners-to-keep-more-of-their-equity/
- O.C.G.A. §48-4-42 (Georgia redemption): https://codes.findlaw.com/ga/title-48-revenue-and-taxation/ga-code-sect-48-4-42/
- Tennessee redemption change (2026): https://www.billtrack50.com/billdetail/1945908
- NRS 361.570 (Nevada): https://nevada.public.law/statutes/nrs_361.570
- Arkansas Commissioner of State Lands FAQ: https://www.cosl.org/Home/Faq
- Tyler v. Hennepin County, 598 U.S. 631 (2023), docket and opinion: https://www.supremecourt.gov/docket/docketfiles/html/public/22-166.html
General information, not legal or financial advice.