Figure out if Buying Tax Liens Are For You
Even before you decide to get involved with tax lien certificates, you should learn about the pros and cons
You need to understand a few common things about tax lien investing, like the difference between a tax deed and tax lien county or state and what bidding on the premium is. When you have a good grasp on the fundamentals of buying tax liens, you should decide if this is something that you would really like.
If you determine that Tax Lien Investing is something you would like, read on!
Locate a good Tax Lien Web Site
Finding a tax lien website is actually quite simple. Tax lien sales are done at the county level, not the state level. So you should start with the county website.
You could use the google search engine and enter terms like "buy tax liens in texas" or "counties in texas with tax lien sales." Replace texas with whatever state you are interested in. If I wanted to buy tax liens in California, I would type in "California Tax Collector" in the Google search engine.
This will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Join A few Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. Be prepared to provide a refundable deposit as a part of the registration process. If you win a bid the deposit will be used to fund the tax lien. Otherwise the amount will be refunded to you once the tax sale is done.
Understand how the Tax Lien Bidding process works
There are quite a few ways to bid during tax lien sales auctions. In the event that there is more than one tax lien investor one of several bidding methods are used.
When multiple investors are involved, the winner is determined by one of the following methods. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Under this method, the investor bid against each other to see who will pay the higher "premium" (above the face value of the lien). The additional premium may or may not earn interest, and (in some states) the investor might not get the additional premium back if the lien is redeemed. Colorado is a state that uses the premium bid method.
Random Selection.the order of bidders is selected at random with the random selection method. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. The bidding process continues in this sequential way until all the liens have been presented.
Bid Down the Ownership. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. In actuality, very few investors will bid on liens for less than full ownership to the property.
So in the even there are multiple bidders on the same tax lien, the random selection method will be used. Liens that are not purchased at the auction are turned over to the county. Some states allow "over the counter" purchases of liens not sold at auction.
Even before you decide to get involved with tax lien certificates, you should learn about the pros and cons
You need to understand a few common things about tax lien investing, like the difference between a tax deed and tax lien county or state and what bidding on the premium is. When you have a good grasp on the fundamentals of buying tax liens, you should decide if this is something that you would really like.
If you determine that Tax Lien Investing is something you would like, read on!
Locate a good Tax Lien Web Site
Finding a tax lien website is actually quite simple. Tax lien sales are done at the county level, not the state level. So you should start with the county website.
You could use the google search engine and enter terms like "buy tax liens in texas" or "counties in texas with tax lien sales." Replace texas with whatever state you are interested in. If I wanted to buy tax liens in California, I would type in "California Tax Collector" in the Google search engine.
This will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Join A few Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. Be prepared to provide a refundable deposit as a part of the registration process. If you win a bid the deposit will be used to fund the tax lien. Otherwise the amount will be refunded to you once the tax sale is done.
Understand how the Tax Lien Bidding process works
There are quite a few ways to bid during tax lien sales auctions. In the event that there is more than one tax lien investor one of several bidding methods are used.
When multiple investors are involved, the winner is determined by one of the following methods. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Under this method, the investor bid against each other to see who will pay the higher "premium" (above the face value of the lien). The additional premium may or may not earn interest, and (in some states) the investor might not get the additional premium back if the lien is redeemed. Colorado is a state that uses the premium bid method.
Random Selection.the order of bidders is selected at random with the random selection method. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. However, bidder number one will not be offered another lien until their ticket number comes up again in the rotation. The bidding process continues in this sequential way until all the liens have been presented.
Bid Down the Ownership. This method is used in Iowa and a few other states, the investor willing to purchase the lien for the lowest percent of ownership on the property will be awarded the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. In actuality, very few investors will bid on liens for less than full ownership to the property.
So in the even there are multiple bidders on the same tax lien, the random selection method will be used. Liens that are not purchased at the auction are turned over to the county. Some states allow "over the counter" purchases of liens not sold at auction.
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