Pinpoint If Tax Lien Investing is Something you would enjoy
Even before you choose to tax on tax lien investing, you should learn about the pros and cons
You need to realize some of the common terms and procedures such as redemption period for the particular county, bid down the interest, bid on the premium, etc etc. 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!
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. 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.
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 step will give you a lot of results to filter through.
Register With Online Tax Lien Directories
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.
In the event that more than one investor seeks the same lien, depending on state law the winner will be determined by one of five methods: Bid Down the Interest.with this bid method, the investor willing to accept the lowest interest rate wins. 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. In some counties the additional premium does not earn any interest and may not be refundable. 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. 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. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % 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. Not many investors will buy liens in states that use the ownership method.
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. Liens not sold at auction will then be available for "over the counter" purchasing.
Even before you choose to tax on tax lien investing, you should learn about the pros and cons
You need to realize some of the common terms and procedures such as redemption period for the particular county, bid down the interest, bid on the premium, etc etc. 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!
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. 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.
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 step will give you a lot of results to filter through.
Register With Online Tax Lien Directories
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.
In the event that more than one investor seeks the same lien, depending on state law the winner will be determined by one of five methods: Bid Down the Interest.with this bid method, the investor willing to accept the lowest interest rate wins. 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. In some counties the additional premium does not earn any interest and may not be refundable. 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. 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. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % 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. Not many investors will buy liens in states that use the ownership method.
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. Liens not sold at auction will then be available for "over the counter" purchasing.
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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 .