Tax Lien Sales Information
Tax lien sales are normally conducted in an auction style format, at least once per year, in each county of each state that offers tax lien opportunities to investors. Larger states and counties hold more frequent tax lien auctions, and some are now conducted online.
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Back Taxes
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Local governments rely on property taxes to pay for community services, such as fire and police. When property taxes are not paid, many counties allow private investors to pay those delinquent taxes, with the promise of receiving interest or penalty payments in the future.
Auctions
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Tax liens are commonly sold in auction format, at least once per year. Most tax lien auctions require your physical presence, but a few are now available online.
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Over-the-Counter
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Sometimes not all of the tax liens are sold during the auction process. In many counties, an investor can simply go to the county courthouse and buy such leftover liens directly.
Bid Down
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Most tax lien sales auctions operate on a "bid down the interest" principle. Bidding may start at 16 percent, for example, and investors bid for lower interest rates. The winner is the one who bid for the lowest interest on the lien.
Interest vs. Penalty
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A few states offer penalty fees instead of interest on a tax lien investment. Texas has a 25 percent penalty, for example, while Arizona has a bid down system that starts at 16 percent maximum annual interest.
Liens are Loans
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Buying a tax lien is technically making a loan to someone to cover their property taxes. You are not buying the property itself, and holding the tax lien does not mean you hold any ownership in the property.
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References
- Photo Credit for sale apply within image by Keith Frith from Fotolia.com
