Determine if Tax Lien Investing is In your future
Even before you choose to become a tax lien investor, you should understand the rewards involved as well as the risks.
You must learn 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 feel that being a tax lien investor is in your future, keep reading!
Locate a good Tax Lien Web Site
This is actually the easy part. Tax liens are sold by county so you should pick a county you want to invest in, then locate the website for that county.
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.
Join A few Tax Lien Websites
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. 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.
Understand the Rules Of Bidding For Tax Liens Online
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.Under this method, the investor bid against each other to see who will pay the higher “premium” (above the face value of the lien). Note that the amount bid over the original value of the lien may not earn interest. 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. 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 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. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. 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.