Decide if Tax Liens Are For You
Before you actually even decide to get involved with tax lien certificates, be aware of the risks as well as the rewards.
You need to know 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. Once you have a good understanding of the basics of tax lien investing, you need to decide if this type of investing is for you and suits your personality.
If buying tax liens are in your future, proceed to the next chapter!
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". 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.
Sign up With some 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. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Understand the Rules Of Bidding For Tax Liens Online
There are several different types of bidding methods involved in a tax lien auction. One of several bidding methods will be used if more than one investor bids on the same property.
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.With this method investors are fighting to see who will pay the most for 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 one state that does this.
Random Selection.bidders are selected at random with this type of method. It is common for a computer to do the random selection, however in smaller counties other methods may be used. 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. In the event that bidder number 1 refuses the lien that is offered, the bidder with the next number will have priority over all the other bidders. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. Once bidder 1 bids, bidder 2 gets to bid, then bidder 3, then 4 and so on...then back at 1 and repeat.
Bid Down the Ownership. The winning bid goes to the tax lien investor willing to accept the least percentage of ownership on 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 not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you actually even decide to get involved with tax lien certificates, be aware of the risks as well as the rewards.
You need to know 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. Once you have a good understanding of the basics of tax lien investing, you need to decide if this type of investing is for you and suits your personality.
If buying tax liens are in your future, proceed to the next chapter!
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
Another option, use the famous google search engine and enter the county that you are interested in, followed by "tax collector". 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.
Sign up With some 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. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Understand the Rules Of Bidding For Tax Liens Online
There are several different types of bidding methods involved in a tax lien auction. One of several bidding methods will be used if more than one investor bids on the same property.
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.With this method investors are fighting to see who will pay the most for 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 one state that does this.
Random Selection.bidders are selected at random with this type of method. It is common for a computer to do the random selection, however in smaller counties other methods may be used. 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. In the event that bidder number 1 refuses the lien that is offered, the bidder with the next number will have priority over all the other bidders. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. Once bidder 1 bids, bidder 2 gets to bid, then bidder 3, then 4 and so on...then back at 1 and repeat.
Bid Down the Ownership. The winning bid goes to the tax lien investor willing to accept the least percentage of ownership on 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 not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
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