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 realize 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. 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.
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.
Register With Online Tax Lien Directories
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
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.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.With this method, a bidder will be selected randomly from all the bidders. In most cases a computer does the random selection but this can vary. 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. 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. 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. 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. 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 realize 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. 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.
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.
Register With Online Tax Lien Directories
Keep in mind that not all Tax Lien auctions are available online so your county of choice may not be available.
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.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.With this method, a bidder will be selected randomly from all the bidders. In most cases a computer does the random selection but this can vary. 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. 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. 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. 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. Some states allow "over the counter" purchases of liens not sold at auction.
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