Choose if Tax Liens Are For You
Even before you choose to become a tax lien investor, be aware of the risks as well as the rewards.
You need to realise 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 basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If you feel that being a tax lien investor is in your future, keep reading!
Search The Web For Good Tax Lien Websites
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
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
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
There are several different types of bidding methods involved in a tax lien auction. In the event that there is more than one tax lien investor one of several bidding methods are 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.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.Here investors (bidders) bid on the face value of the lien or premium. 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.the order of bidders is selected at random with the random selection method. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. 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. The next lien then goes to the next number in line.
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 case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
Even before you choose to become a tax lien investor, be aware of the risks as well as the rewards.
You need to realise 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 basic grasp of the basics of investing in tax liens, you should decide if this is something that you could be passionate about.
If you feel that being a tax lien investor is in your future, keep reading!
Search The Web For Good Tax Lien Websites
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
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
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
There are several different types of bidding methods involved in a tax lien auction. In the event that there is more than one tax lien investor one of several bidding methods are 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.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.Here investors (bidders) bid on the face value of the lien or premium. 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.the order of bidders is selected at random with the random selection method. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. 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. The next lien then goes to the next number in line.
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 case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens not sold at auction are considered "struck" (or sold) to the entity (usually the county) conducting the auction. Liens not sold at auction will then be available for "over the counter" purchasing.
About the Author:
To find out more about how to buy tax liens, visit Dale Poyser's website to learn more abouttax lien states.
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