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Tax lien auctions have become quite popular in recent years. With the real estate market taking a turn for the worst and the stock market remaining unstable, people have jumped on new ways to make money through investing. Investors have been turning to tax sale auctions rather than traditional real estate, which requires much more capital.
Tax lien auctions are designed wherein the governing authorities take action on the collection of unpaid property taxes. This is a court ordered auction and is either an auction for tax lien certificates or for tax deed sales depending on the state and the details of the sales. The tax lien certificate auction involves selling a certificate in order to collect the taxes and interest owed by the delinquent taxpayer. The other type, tax deed auction, is when the property’s deed is sold to the highest bidder to payoff the delinquent taxes.
In the sale of a tax lien certificate, an investor attends an auction and bids on a lien according to county or state regulations. At most auctions bids follow what is called "bidding-down" the interest. Meaning, the investor who bids for the least amount of interest ( he is willing to recieve) is the winning bidder. This differs from a tax deed auction where the bids begin with the taxes owed and the highest bidder is the winner of the taxes.
Other elements of the tax lien auction are similar to your traditional auction. An auction "referee" or a trustee controls the auction by first explaining the terms of the sale and what kind of deposit is needed for the property. The only factor to take into consideration in this type of investment is that you will not know any of the important details of the property, such as the condition of the home and its location, as well as any shortcomings it might have. No matter what happens though, these types of investments have a great return and are worth the time and effort.
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