What Is a Land Bank, and How Is It Different From a Tax Sale?

If you have looked for cheap property, you have probably run into two things that sound alike: tax sales and land banks. Both deal with property whose owners stopped paying taxes. They work very differently, and the difference decides what you are actually buying.

What a land bank is

A land bank is a public or nonprofit organisation set up to take on vacant, abandoned, and tax-foreclosed property and get it back into use. Most are created by a county or a city under a state law that allows them. Not every state has such a law, which is why land banks cluster in some states and are absent in others.

A land bank’s job is not to make money on each sale. Its job is to stop property from sitting empty. That goal shapes everything about how it sells.

What a tax sale is

A tax sale is how a county recovers unpaid property taxes. The details depend on the state, but there are two broad kinds:

• Tax lien sales. The county sells the debt, not the property. The buyer is paid back with interest if the owner settles up, and can only pursue the property itself if the owner does not.
• Tax deed sales. The county sells the property, usually at auction, to the highest bidder.

Either way, the county’s aim is to collect what it is owed. Who buys, and what they do next, is mostly not its concern.

The differences that matter

Who gets to buy. A tax sale goes to the highest bidder. A land bank can choose its buyer, and many give priority to people who will live in the property, to neighbours, or to community groups.

What you promise. At a tax sale you usually promise nothing beyond payment. A land bank often attaches conditions: renovate within a set time, live there for a period, or keep the lot maintained.

Price. Auction prices are set by bidding. Land bank prices are set by the land bank and are often below market value, because the conditions are part of the deal.

Title. Property bought at a tax sale can come with unresolved claims that the buyer has to clear. Land banks in many states have legal tools to clear old liens and back taxes before they sell. Do not assume this: ask the land bank what kind of deed you will receive and whether title insurance is available.

Pace. An auction is over in minutes. A land bank sale involves an application, a review, and sometimes a board vote, and can take weeks or months.

Which one is right for you

If you want a home to live in or a lot next to your own, and you are willing to commit to a plan, a land bank is usually the more forgiving route. If you are comfortable with risk and want no strings, a tax sale may suit you better.

Every land bank sets its own rules. Read them before you fall for a property, and treat anything on this site as a starting point rather than the final word.