Tax Lien Certificates Guide

Archive for the ‘Tax Lien Certificates’ Category

Tax lien certificates are often bid in a tax lien sale. This kind of auction is where instead of purchasing the actual property, the investor only purchases the delinquent taxes amount. Being an investor, one must know these general basic methods:

1.) Bidding Down Interest: When investing in tax lien certificates, this method is often used. Prior to the purchase of the tax lien certificate, bidders are given the permission to set their own lien interest rate. It is important that the rate of interest be at a level allowing you to make a good profit as the owner of the property will be buying the lien back from the investor. There are some states that have pre-set minimum rates to allow the investors a guaranteed rate.

2.) Bidding Down Ownership: Investors are given the opportunity to be able to bid down the percentage of future property ownership in purchasing tax lien certificates. This is a less preferable method as investors must be careful to protect their financial interests since the amount of the final profits depends on the amount of ownership. Both the investor and property owner get to own the property as the investor will get the winning percentage while the remainder will go to the property owner.

3.) Random Selection Tax Lien Sale: Before the sale of tax lien certificates, the investors are allowed to access all available properties. Numbers are given to each bidder and there will be a random drawing for every property that is auctioned. When the number of the bidder is drawn, the bidder can either accept or deny the presented tax lien at the given price of the tax lien that is delinquent.

4.) Premium Bidding: Traditional distressed property auction is very similar to this method. The highest bidder gets the sold lien at a price that is above the actual amount of the lien. In some states, there is a limited interest to the amount of the lien.

5.) Off the Shelf or Over the Counter Tax Lien Purchase: There are several counties that allow purchasing tax lien deeds or certificates directly from the county tax collection office. It is essential that the investor will be careful to research the property before purchasing the lien because most of the tax liens were not sold at a previous auction. Investors must be on the lookout for any property problems that could lessen the investor’s profit. Fortunately, with proper research and knowledge on the taxing authority, over the counter tax lien sales are easy ad can make a profitable sale.