Tax Sales

I am looking at tax liens in NY because you can go to court and sieze the property after 3-4 months according to what I read in BE A REAL ESTATE MILLIONAIRE.

I am looking at FL because of NO STATE INCOME TAX.

However, I am confused a little about what years taxes you are purchasing with the lien. Also, would I have to keep paying the taxes during the redemption period so that no other liens can be purchased?

Was curious if anyone with experience in these states could walk me through the processes in these states.

Thanks for the help.
Eric

When you buy a TLC you are characteristically buying one years worth of taxes owed. In many counties, the current tlc owner will be offered an opportunity to buy future tax years that might be delinquent prior to the tax auction occurs. This action is called an endorsement.

In some counties throughout the US there is a bidding process that allows a tax lien investor to bid a premium on tax lien certificates that are up for auction.

A premium is a dollar amount above and beyond the starting auction amount aka owed tax amount. It is one way to bid in increments to try to win the rights to the tax lien certificate. If you are the highest bidder you win in this type of bidding format.

In most every area, the premium is not reimbursed when the tax lien id redeemed. It does not earn any interest like the rest of the money paid does over the duration of the redemption period. So basically, you are paying the county extra money for the right to be the lienholder on that tax lien.

Questions for the County Tax Authority

1. Who handles tax liens for the county (Treasurer, Sheriff, or Tax Assessor)?

2. Does the county use tax lien certificates or tax deeds?

3. How often are tax sales held? (If they offer both tax lien certificates and tax deeds, you should find out how often each occurs)

4. When is the next auction?

5. Where will the tax sale be held? ( online or at a specific location - get the street address, building name, floor and room number)

6. When and where is the public notice of tax sales posted?

7. Does the auction take place in one day or over several days?

This type of bidding method is used when buying tax lien certificates. In this auction you are bidding down the interest rate or rate of return you will be receiving on the tax lien certificate. Bidders will decide how low of an interest rate they are willing to accept before buying the tax lien certificate.

In some areas, investors may be offered the opportunity to bid down the ownership when buying tax lien certificates. It is not a favorable method of bidding for most investors. As the bidding gets lower, the investor will ultimately receive less of a percentage of the property (and the profits), making it the most undesirable of all bidding methods. For instance, if a bidder bids 80% ownership, they will in turn only own 80% of the property, and only be entitled to 80% of the profits later on if it is sold on the retail market. The state keeps the other 20%.

Some counties and cities prefer the random selection method to auction off their tax liens, rather than open bidding, since it seems the fairest way to offer all investors a chance at the properties available. In the random selection process each bidder is given a specific number, than a computer (or person) draws a number for each property up for auction. The first bidder's number is drawn and they have the right to accept or deny the option to bid on the tax lien. If they deny the right to bid, the next number is chosen, and so on. There number is then placed back into the mix and could be pulled at a later time on another proeprty.

Tax liens are sold to the highest bidder offering the most premium over the amount of the lien. Basically, if you are willing to pay more, you will win the tax lien. Most states do not allow interest to accrue on this "overage," but only the original lien amount. In most cases, this amount of money is not reimbursed, in fact, it is money that is pocketed by the county and is not paid bakc when the taxes are redeemed.

If you are going to buy a tax deed you need to do adequate due diligence. Some of the items you might consider researching and checking out would be the following:
What property types are desireable and the best assets to invest in that area?
What are the uses for the property? Are there any code or zoning restrictions?
Are there any existing EPA Issues on title?
What types of clouds could be associated/tied to this Tax Deed? What is the procedure to remove these and how much could it cost to do this?
Which properties are on the struck off property list? Are there any risks associated with these properties?
What is the current fair market value versus the amount needed to win the tax deed?

Did you know that most of the TLC or tax lien certificates sold can be assigned? They can be assigned to another investor who wants to wait for the rate of return at the end of the redemption period or possibly get the house. It is a great way for an antry level tax lien certificate investor to get started. You can gather a buyers list, determine their investment criteria, find tlc's that meet those criteria, and then assign these over to then assign these over to your buyers.

Now, there are some counties that have some restrictions on how soon you can do it. It could be 6 months to a year. In some cases, the county might require some paperwork to be done before this can be finalized. In some cases, there will be additional fees to assign the tlc.