Monday, February 05, 2007

Step Five to Building Your Profitable Tax Lien Portfolio

This is the six article in a series of eight articles about how to build a profitable portfolio of tax lien certificates or tax deeds. If you missed the previous articles in this series you can read them at

Once you’ve done your due diligence on the tax sale properties that you intend to bid on it’s time to prepare to go to the tax sale. Preparing to go to the sale consists of registering to bid at the sale along with getting your paperwork and payment in order. In most states you need to register before the sale in order to bid. Depending on what state and county you are investing in, you may need to register as far as two weeks before the sale, or you may be able to register as close to the sale as a few minutes before it starts. I’ve even been to some sales in New Jersey where late comers are allowed to register and bid at the tax sale. Some municipalities do not require you to register ahead of time, only that you submit the proper paperwork if you are the successful bidder on a property.

Some counties will require a deposit in order to register. The deposit amount could be anywhere from $100.00 to a few thousand dollars (as in the case of many online tax sales). Large deposits are usually returned to the investor if nothing is purchased at the sale. Smaller deposits are sometimes returned and sometimes not returned, depending on the county. Nassau County, NY, for instance has a tax lien sale that typically is 3-4 days long. They have a registration fee of at least $100 for each day that you intend to bid and the registration fee is non-refundable.

You also need to make sure that you have the proper funds for payment before you go to the sale. For most tax sales, only certified funds are accepted. You need to figure out ahead of time how much money you think that you’ll need. This can be a little difficult because you don’t know what properties are going to be left in the sale and you don’t know if you will be the successful bidder on any of them. Sometimes you will be allowed time to go the bank and get payment after the sale. In this case you will be able to go to your bank and get the certified funds in the exact amount that you need. When you’re not allowed the time to go to the bank, you will have to have the certified funds, made out to the county tax collector, with you at the sale. In this case, come up with your best estimate of what you think is the most that you will spend and get certified checks made up in different denominations that total the amount you think that you'll need. This way if you have to wait for a refund check from the county for your change, at least it won’t be for a very large amount. Make sure you check with the tax collector a couple of days before the sale to find out what the acceptable forms of payment are and whether or not you will be allowed to go to the bank and get a check after the sale.

Another thing that you’ll have to have with you for the sale is the proper paper work. In some states you will have to fill this out when you register and in others you will need to bring it to the sale. Most tax collectors will require a W-9 form and a bidder information sheet. The W-9 form is a standard IRS form and you can get it online at the IRS web site. The bidder information sheet is usually filled out during registration and has your personal information, or your business information if you’re investing with a business name. This form is not always standardized and every county may have a different form. For most tax deed states there is another form that you will have to fill out if you are the successful bidder on a tax sale property and that is an affidavit of no taxes due for the county and/or state that you are purchasing a tax deed from. You see most counties will not sell a tax deed to someone who has unpaid taxes in their district. Sometimes a signed affidavit is all that is necessary, but in some states, as in Texas, the county clerk has to sign off on a statement verifying the fact that you do not owe any taxes.

This is a summary of step five to building a profitable tax lien or tax deed portfolio. In subsequent articles I will take each one of the remaining steps in depth to give you an idea of what each step involves. For more information about how you can build your own profitable tax lien or tax deed portfolio, go to

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