Choose if Tax Liens Are For You
Before you can even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You need to realise 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 basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If you feel that being a tax lien investor is in your future, keep reading!
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
Go to the google search engine and type in the state that you want to invest 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 will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Sign up With some Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
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 may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
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.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Here investors (bidders) bid on the face value of the lien or premium. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is one state that does this.
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. Using this method the liens are offered to the bidders in sequential order. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. The next lien then goes to the next number in line.
Bid Down the Ownership. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % 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. 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. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Some states allow "over the counter" purchases of liens not sold at auction.
Before you can even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You need to realise 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 basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If you feel that being a tax lien investor is in your future, keep reading!
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
Go to the google search engine and type in the state that you want to invest 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 will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Sign up With some Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
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 may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
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.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Here investors (bidders) bid on the face value of the lien or premium. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is one state that does this.
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. Using this method the liens are offered to the bidders in sequential order. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. The next lien then goes to the next number in line.
Bid Down the Ownership. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % 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. 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. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Some states allow "over the counter" purchases of liens not sold at auction.
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