Figure out if Buying Tax Liens Are For You
Even before you choose to tax on tax lien investing, you should learn about the pros and cons
You must understand some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
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. For example, if I wanted to invest in a county in Florida I would type in "Florida 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.
Register With Online Tax Lien Directories
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
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. 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. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is a state that uses the premium bid method.
Random Selection.With this method, a bidder will be selected randomly from all the bidders. In most cases a computer does the random selection but this can vary. 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. 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. 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. If a tax lien is not purchased at an auction, the county will take possession of it. Some states allow "over the counter" purchases of liens not sold at auction.
Even before you choose to tax on tax lien investing, you should learn about the pros and cons
You must understand some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
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. For example, if I wanted to invest in a county in Florida I would type in "Florida 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.
Register With Online Tax Lien Directories
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
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. 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. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is a state that uses the premium bid method.
Random Selection.With this method, a bidder will be selected randomly from all the bidders. In most cases a computer does the random selection but this can vary. 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. 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. 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. If a tax lien is not purchased at an auction, the county will take possession of it. Some states allow "over the counter" purchases of liens not sold at auction.
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