Decide if Tax Liens Are For You
Even before you choose to tax on tax lien investing, you should learn about the pros and cons
You must learn some of the common terms and procedures such as redemption period for the particular county, bid down the interest, bid on the premium, etc etc. 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 buying tax liens are in your future, proceed to the next chapter!
Find A Good Website For Purchasing Tax Liens
This part is actually fairly simple 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.
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. If I wanted to buy tax liens in California, I would type in "California Tax Collector" in the Google search engine.
This step will give you a lot of results to filter through.
Join A few 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 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.
Learn The Ways to bid on Tax Liens
There are quite a few ways to bid during tax lien sales auctions. 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.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 randomly when this method is used. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. 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. 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. For example, an investor may decide to take a lien on only 85% of the property. 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 case where multiple investors are bidding on the same property, the random selection process will be used instead. 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 tax on tax lien investing, you should learn about the pros and cons
You must learn some of the common terms and procedures such as redemption period for the particular county, bid down the interest, bid on the premium, etc etc. 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 buying tax liens are in your future, proceed to the next chapter!
Find A Good Website For Purchasing Tax Liens
This part is actually fairly simple 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.
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. If I wanted to buy tax liens in California, I would type in "California Tax Collector" in the Google search engine.
This step will give you a lot of results to filter through.
Join A few 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 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.
Learn The Ways to bid on Tax Liens
There are quite a few ways to bid during tax lien sales auctions. 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.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 randomly when this method is used. Typically a computer is used to select bidders at random, but this can vary from county to county. Nevada is a state that uses Random selection.
Rotational Selection. With this technique, the bidder with bid card 1 gets the first lien, bid card 2 gets the second lien and so on. 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. 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. For example, an investor may decide to take a lien on only 85% of the property. 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 case where multiple investors are bidding on the same property, the random selection process will be used instead. 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.
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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