Figure out if Buying Tax Liens Are For You
Before you will even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You must 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. 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 you determine that Tax Lien Investing is something you would like, read on!
Locate a good Tax Lien Web Site
This is actually the easy part. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
Go to the google search engine and type in the state that you want to invest in, followed by "tax collector". For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Join A few Tax Lien Websites
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. You might need to set up an account and or provide a deposit which will be required if you want to be a bidder. There could be a minimum requirement to register as a bidder. Don't worry it is refundable.
Learn The Ways to bid on Tax Liens
There are quite a few ways to bid during tax lien sales auctions. 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.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Here investors (bidders) bid on the face value of the lien or premium. Note that the amount bid over the original value of the lien may not earn interest. 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 method, the first lien will be offered to the investor holding bid ticket number one. 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. For example, an investor may decide to take a lien on only 85% of the property. 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. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens that are not purchased at the auction are turned over to the county. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you will even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You must 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. 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 you determine that Tax Lien Investing is something you would like, read on!
Locate a good Tax Lien Web Site
This is actually the easy part. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
Go to the google search engine and type in the state that you want to invest in, followed by "tax collector". For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Join A few Tax Lien Websites
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
You will be required to provide information such as your social security number or EIN (Employer Identification Number) if you will be purchasing the liens through a corporation. You might need to set up an account and or provide a deposit which will be required if you want to be a bidder. There could be a minimum requirement to register as a bidder. Don't worry it is refundable.
Learn The Ways to bid on Tax Liens
There are quite a few ways to bid during tax lien sales auctions. 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.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Here investors (bidders) bid on the face value of the lien or premium. Note that the amount bid over the original value of the lien may not earn interest. 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 method, the first lien will be offered to the investor holding bid ticket number one. 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. For example, an investor may decide to take a lien on only 85% of the property. 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. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens that are not purchased at the auction are turned over to the county. Liens not sold at auction will then be available for "over the counter" purchasing.
About the Author:
Want to find out more about the basics of buying tax liens, then visit Dale Poyser's website at to learn about buying tax liens .
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