Figure out if Buying Tax Liens Are For You
Before you really even choose to tax on tax lien investing, you should understand the rewards involved as well as the risks.
You must know some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If buying tax liens are in your future, proceed to the next chapter!
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. 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". For example, if I wanted to invest in a county in Florida I would type in "Florida 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
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. 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 how the Tax Lien Bidding process works
Understand that different counties have different rules for bidding on a tax lien. In the cases where more than one investor wants to bid on the same property, one of the following five methods is 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.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.With this method investors are fighting to see who will pay the most for the lien. 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. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. Once bidder 1 bids, bidder 2 gets to bid, then bidder 3, then 4 and so on...then back at 1 and repeat.
Bid Down the Ownership. The winning bid goes to the tax lien investor willing to accept the least percentage of ownership on the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. 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. In actuality, very few investors will bid on liens for less than full ownership to the property.
So in the even there are multiple bidders on the same tax lien, the random selection method will be used. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you really even choose to tax on tax lien investing, you should understand the rewards involved as well as the risks.
You must know some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If buying tax liens are in your future, proceed to the next chapter!
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. 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". For example, if I wanted to invest in a county in Florida I would type in "Florida 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
Not all counties give you the ability to purchase tax liens online, so you will only be able to register in certain counties.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. 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 how the Tax Lien Bidding process works
Understand that different counties have different rules for bidding on a tax lien. In the cases where more than one investor wants to bid on the same property, one of the following five methods is 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.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.With this method investors are fighting to see who will pay the most for the lien. 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. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. With this method, the first lien will be offered to the investor holding bid ticket number one. If this bidder refuses the lien, bid ticket number two may then bid. The first bidder cannot bid again until all other bidders have had an opportunity to bid or pass on a lien. Once bidder 1 bids, bidder 2 gets to bid, then bidder 3, then 4 and so on...then back at 1 and repeat.
Bid Down the Ownership. The winning bid goes to the tax lien investor willing to accept the least percentage of ownership on the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. 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. In actuality, very few investors will bid on liens for less than full ownership to the property.
So in the even there are multiple bidders on the same tax lien, the random selection method will be used. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
About the Author:
To learn more about tax lien basics, then visit Dale Poyser's website to learnhow to buy tax liens online.
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