Tax Lien Certificate Auction

The tax lien certificate auction is where you buy tax lien certificates that pay higher rates of return than CDs. Earn as much as 16% or higher depending on the state in which you are bidding.

The purpose of the tax lien certificate auction is for the county to recover lost property tax revenue.

When property owners fail to pay their taxes, the county has a hard time meeting its obligations for county services.

The solution to the county's financial plight is to auction a lien on the property owned by the delinquent tax payer. You, the tax lien investor, are effectively loaning the taxpayer the money to pay his taxes.

You, the tax lien investor, in return, earn interest on the money you "loaned" to the property owner while the property taxes remain unpaid. You are given a first lien position on the subject property, subordinate only to state tax liens. Yes, your lien is superior to any mortgage or trust deed on the property.

When the taxpayer pays off his tax debt, and most do, you are repaid with interest by the county. There is no need to communicate with the delinquent property owner to collect your money. Nice!

The Tax Lien Certificate Auction

Usually the tax lien auction is conducted once a year. Anyone can attend. Some large metropolitan areas auction their liens online.

Before you can bid at the tax lien sale, you must pre-register with the County Treasurer's office in person or online where permitted.

At the time of registration you will be required to make a deposit. In Maricopa county, Arizona the amount is $500, for example.

The Tax Lien Certificate Auction Bidding Process

Each state has different laws regarding the tax liens or tax deeds. You must know what you are bidding on. Each county has a different way of conducting the auction.

In states like Arizona, you will be bidding the interest rate down from 16%. The investors who are willing to accept the lowest interest rate on their tax line certificate is the winning bidder at the auction.

In states like Colorado, a different method is used. In Colorado, the lucky bidder is the investor willing to pay the most cash over and above the lien amount to the state. Just remember, if the home owner redeems property, you will not recover the extra premium paid.

In states like Michigan, you are bidding down the percentage of ownership of the property you are willing to accept. If you win the bid, you will become a co-owner with the delinquent property owner. Do you still like the 50% interest rate on your tax lien certificates in Michigan?

Congratulations on winning your bids at the tax lien certificate auction! I would recommend that you spend an hour with a tax lien attorney in the state in which you just purchased the tax liens.

You need to know the procedure of foreclosing on the tax liens and any other legal obligations your state requires.

Good luck in your new legitimate home business.

Return to Tax Lien Investing.

Return from Tax Lien Certificate Auction to Legitimate Home Business home page.