Redemption interest in a Colorado tax lien sale is the interest that a tax lien buyer earns when a property owner pays off (redeems) their delinquent taxes before the lien converts into a treasurer’s deed (ownership transfer).
Redemption Interest
Here’s how it works:
- When a property owner fails to pay property taxes, the county “sells a tax lien” on the property at auction. Investors who buy these liens pay the unpaid taxes on behalf of the owner.
- If the owner redeems their property by paying everything owed before the county issues a treasurer’s deed, the investor gets back the amount they paid (plus redemption interest).
- Interest accrues from the date of the tax lien sale until the date the property owner redeems the lien.
Put simply, redemption interest is the return an investor earns on the money they paid to cover someone’s unpaid taxes, paid only if the owner redeems the lien. It’s designed to make investing in tax liens financially worthwhile.
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