Figure out if Buying Tax Liens Are For You
Even before you choose to become a tax lien investor, you should understand the rewards involved as well as the risks.
You need to 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 you feel that being a tax lien investor is in your future, keep reading!
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. Tax lien sales are done at the county level, not the state level. So you should start with the county website.
You could use the google search engine and enter terms like "buy tax liens in texas" or "counties in texas with tax lien sales." Replace texas with whatever state you are interested in. For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Sign up With some 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.
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.
Learn The Ways to bid on Tax Liens
There are different ways to bid on tax liens during an auction. 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 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). 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.bidders are selected at random with this type of method. 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 method, the first lien will be offered to the investor holding bid ticket number one. 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. 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. 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. If a tax lien is not purchased at an auction, the county will take possession of it. Some states allow "over the counter" purchases of liens not sold at auction.
Even before you choose to become a tax lien investor, you should understand the rewards involved as well as the risks.
You need to 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 you feel that being a tax lien investor is in your future, keep reading!
Find A Good Website For Purchasing Tax Liens
Finding a tax lien website is actually quite simple. Tax lien sales are done at the county level, not the state level. So you should start with the county website.
You could use the google search engine and enter terms like "buy tax liens in texas" or "counties in texas with tax lien sales." Replace texas with whatever state you are interested in. For example, if I wanted to invest in a county in Florida I would type in "Florida Tax Collector" in the Google search engine.
Using google will turn up a lot of results for tax lien investing and allow you to even sign up for a few auctions from the comfort of your couch.
Sign up With some 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.
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.
Learn The Ways to bid on Tax Liens
There are different ways to bid on tax liens during an auction. 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 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). 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.bidders are selected at random with this type of method. 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 method, the first lien will be offered to the investor holding bid ticket number one. 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. 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. 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. If a tax lien is not purchased at an auction, the county will take possession of it. Some states allow "over the counter" purchases of liens not sold at auction.
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