To collect overdue tax revenue some states have enacted laws permitting counties to place liens on property that may be bid on by investors.  Investors buy the tax liens thus paying off the back taxes in exchange for lucrative interest penalties.  If the homeowner does not pay the investor the principle plus interest payment by the expiration date of the lien certificate (redemption period) the investor has the option of foreclosing on the property that secured the tax lien...possibly obtaining the property for a mere fraction of its worth.  While it is possible for this to occur, in most cases (95-99%) the tax lien is paid off with interest before the end of the redemption period. 

 

Tax sales are the means by which the counties provide the tax lien certificates and tax deeds to the investor.  Usually tax sales occur by way of auction where the winning bid is either the highest premium offered or the lowest interest rate accepted.