Pinpoint If Tax Lien Investing is Something you would enjoy
Before you'll even decide to get involved with tax lien certificates, be aware of the risks as well as the rewards.
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 basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If buying tax liens are in your future, proceed to the next chapter!
Find A Good Website For Purchasing Tax Liens
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.
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 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.
Learn The Ways to bid on Tax Liens
There are several different types of bidding methods involved in a tax lien auction. In the event that there is more than one tax lien investor one of several bidding methods are used.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. 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.Here investors (bidders) bid on the face value of the lien or premium. 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. In most cases a computer does the random selection but this can vary. Nevada uses the random selection method.
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. 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. 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 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. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you'll even decide to get involved with tax lien certificates, be aware of the risks as well as the rewards.
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 basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If buying tax liens are in your future, proceed to the next chapter!
Find A Good Website For Purchasing Tax Liens
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.
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 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.
Learn The Ways to bid on Tax Liens
There are several different types of bidding methods involved in a tax lien auction. In the event that there is more than one tax lien investor one of several bidding methods are used.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. 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.Here investors (bidders) bid on the face value of the lien or premium. 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. In most cases a computer does the random selection but this can vary. Nevada uses the random selection method.
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. 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. 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 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. Liens not sold at auction will then be available for "over the counter" purchasing.
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