Choose if Tax Liens Are For You
Before you have to even choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to know 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 good understanding of the basics of tax lien investing, you need to decide if this type of investing is for you and suits your personality.
If you determine that Tax Lien Investing is something you would like, read on!
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.
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.
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.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. 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 the Rules Of Bidding For Tax Liens Online
Understand that different counties have different rules for bidding on a tax lien. One of several bidding methods will be used if more than one investor bids on the same property.
When multiple investors are involved, the winner is determined by one of the following methods. Bid Down the Interest.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. 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 one state that does this.
Random Selection.the order of bidders is selected at random with the random selection method. In most cases a computer does the random selection but this can vary. Nevada uses the random selection method.
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. 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. 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. In actuality, very few investors will bid on liens for less than full ownership to the property.
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. Liens not sold at auction will then be available for "over the counter" purchasing.
Before you have to even choose to tax on tax lien investing, be aware of the risks as well as the rewards.
You need to know 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 good understanding of the basics of tax lien investing, you need to decide if this type of investing is for you and suits your personality.
If you determine that Tax Lien Investing is something you would like, read on!
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.
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.
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.
You should be prepared to provide personal information about yourself such as your social security number, name, address, etc. 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 the Rules Of Bidding For Tax Liens Online
Understand that different counties have different rules for bidding on a tax lien. One of several bidding methods will be used if more than one investor bids on the same property.
When multiple investors are involved, the winner is determined by one of the following methods. Bid Down the Interest.this is where several investors negotiate to see who will accept the lowest interest rate among all the bidders. 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 one state that does this.
Random Selection.the order of bidders is selected at random with the random selection method. In most cases a computer does the random selection but this can vary. Nevada uses the random selection method.
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. 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. 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. In actuality, very few investors will bid on liens for less than full ownership to the property.
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. Liens not sold at auction will then be available for "over the counter" purchasing.
