What happens at the tax sale depends on what state you attend a sale in, and on whether it is a tax lien sale or a tax deed sale. Tax lien sales can be very different from state to state or even from county to county within a state. Tax deed sales are pretty much the same around the country.
At most tax deed sales the properties are read off by the auctioneer in the order that they are listed and the price of the property is bid up. The exception to this is in counties that have online deed sales, like some counties in California and Florida. In order to bid at an online auction, you have to register online and put up a deposit. The properties are usually listed in batches and a time frame is given for each batch. You put bids in on the properties that you want to bid on, but you don’t know who else is bidding and what the other bids are. You may not even know if you are the successful bidder on a property until after the sale.
Tax lien sales can differ greatly from state to state. In some states the interest rate is bid down. This happens in Florida, Arizona, (two of the most popular tax lien states) Illinois, and in Nassau County, NY. In other states the interest rate is kept constant and the price of the lien is bid up. The amount bid up from the amount due is referred to as “over-bid” or “premium,” and each state handles it a little differently. In some states you receive interest on the premium paid for tax liens (Alabama and Indiana are two state that give you interest on your premium), and in other states you do not (West Virginia is one of these states). Some states do not pay interest on the premium amount and do not return the premium to the investor should the lien redeem (Colorado and Vermont are two of these states). New Jersey is the only state where the interest rate can be bid down to zero and then premium is bid. You don’t receive any interest on the premium paid, but you do receive your premium back if the lien is redeemed within five years.
In some states, something entirely different than the interest rate or the premium is bid. In these states, what is bid down is the percent ownership interest in the property should the lien be foreclosed. The tax lien certificate is awarded to the bidder willing to accept the lowest percent ownership interest in the property. As you can imagine, this makes for some sticky situations should you have to foreclose on a lien and is not the ideal situation for the investor. Tax sales are conducted in this way in Rhode Island, Nebraska, Louisiana, and Iowa.
Some states will use a random selection or round robin process to award tax lien certificates at the tax sale. With the random selection process, the tax collector or auctioneer randomly selects bidders, usually by bidder number for each parcel as it is read out at the sale. With the round robin procedure, the tax collector will go around the room, offering the next parcel on the list to the next bidder in line. The downfall to both of these procedures is that you cannot pick which properties you want to bid on and only do your due diligence on those properties. Here you do not know which properties will be offered to you and you can only accept or decline the ones that are offered to you. The random selection process is used in Wyoming and in Oklahoma. The round robin procedure is used in some counties in Colorado for liens under a certain amount (the amount differs by county).
One tax lien state does something entirely different than any other, and that is the Commonwealth of Kentucky. In Kentucky, nothing is bid, or randomly selected. There is no auction. They accept bids for the amount due plus costs by mail, e-mail, fax, and in person, and the first bid to be received is awarded the tax lien. Although you can mail or fax your bid in, you have to be present at the “sale” to be awarded the tax lien certificate.
If you need help deciding what state to invest in or with getting ready to invest in tax lien certificates or tax deeds, you may want to take advantage of my JetStart Coaching Call. My JetStart call is a one-on-one coaching call with me for only $99.00. I’ll spend one hour with you answering your specific questions about what you need to do to get started. You can find out more about this call and see if it’s something that you’re ready for by filling out the form athttp://www.yourtaxlieninvestingcoach.com/.
Happy and Prosperous Investing,
Joanne
Showing posts with label Tax Deed Investing. Show all posts
Showing posts with label Tax Deed Investing. Show all posts
Thursday, August 09, 2007
Tuesday, May 29, 2007
Where is the Best Place to Invest?
Where is the best place to invest in tax lien certificates or tax deeds? Most people are concerned about which lien states have the highest interest rates and which deed states start bidding at back taxes. I believe that the best place to start investing is in your own backyard. I think that it’s best to invest in an area that you know, because you’ll know what the property values are and you’ll know what to look out for. Each state has different problems that you have to be aware of, especially if you’re purchasing raw land.
In Pennsylvania where I invest in tax deeds, for example, I have to worry about whether a property will perk or not. If I buy a lot in a deed sale that doesn’t perk I won’t be able to get a septic design approved and won’t be able to build on the property. Its resale value will be a fraction of the price that I could get for it if it had an approved septic design. In another state you might have other concerns. In dry states, like Arizona for example, you may have to be concerned about water rights.
Don’t be too concerned about which state has the highest interest rate. In states with high interest rates, the interest is typically bid down extremely low. What you should be concerned about is will you have the opportunity to pay the subsequent taxes, and will you get the maximum interest rate on your subs, and are there other penalties that you are entitled to.
In New Jersey, for example the interest rate is typically bid down to 0% and then premium can be bid as well. The reason that investors do this is because they know that once they have the lien, they can pay the subsequent taxes and get the maximum interest rate on their “subs,” which is 18%, and they will also receive a penalty on the certificate amount of the lien.
In Florida where the maximum interest rate is also 18%, the interest is typically bid down to as low as ¼ %. In Florida you are not allowed to pay the subsequent taxes, actually you can pay them, but you do not receive any interest on subsequent taxes, nor will you get any subsequent tax payments back should the lien redeem. However, in Florida there is a minimum penalty of 5%, so if you bid less than 5%, you get the penalty instead of the interest rate that you bid.
Don’t be too concerned about which deed states start bidding at back taxes. The more important thing to be concerned about for deed states is, “what will the competition typically bid the price up to.” In some states, real estate is so valuable and the demand outweighs the supply of affordable homes. In these states (California, Florida, and the Northeast States) any property with a home or business on it will be bid up close to market value. Remember, tax sales are auctions and sometimes people get carried away at actions and pay too much money. Online auctions can be especially competitive, and may California and Florida counties have tax sales online.
To find out about tax sales in your county or municipality go to a sale and see what it’s like. Talk to the tax collector, or whoever is responsible for conducting the tax sale in your area to find out more about how to register for the sale and what the procedures and requirements are for bidding. If you need help determining whom you need to contact, you can consult my State Guide.
My State Guide is available as an e-book along with another e-book on how to invest in tax liens. Both books are available for $39.95. My state guide is different from the other resources that you can get online, because I don’t just give you the type of investment, interest rate and redemption period for each state. I tell you who is responsible for the tax sales in each state, so that you know who you have to contact, and I tell you whether or not you can get information online and give you a link to that State’s website with links to the counties.
What if you live in a deed state and you want to invest in tax liens? I’m in Pennsylvania, which is a deed state, but I’m close to New Jersey, which is a lien state, so I do my tax lien investing there. If you’re not close enough to travel to a state that sell tax liens, is there a state that you vacation in or do business in that sell tax liens? If there is maybe you can right off your next vacation if you go to a tax sale? If not, then you may have no other alternative than to invest online. There are only 2 tax lien states that I’m aware of that have online sales – Arizona and Florida. Arizona sales take place in February and March each year, and Florida lien sales (Florida has both lien and deed sales) are in May and June. Be very careful to do your due diligence on these properties. I don’t advise investing online unless you can go look at the properties or you have someone that can look at them for you.
Here are four action steps that you can take right now to find the best place for you to invest.
Call the tax collector and find out what happens in your state. Do they sell tax
liens, tax deeds, or redeemable tax deeds?
Go to a sale and see what it’s like.
If you are in a deed state and you want to invest in tax liens, then find out what
states sell tax liens, if you need help with this get my State Guide.
Find out about online tax sales at http://www.bid4assets.com.
Bid4Assets has mostly deed auctions, In order to find tax lien auctions online; you will have to go to the county’s web site. For this I recommend going through the links on my State Guide.
If you take the action steps above, then you’ll have a good idea of what state is the best for you to invest in. And if you read my State Guide, you’ll have a good idea of what happens at tax sales in each state. If you need step-by-step information on how to get started, I have a $7.00 Special Report on the 7 Steps to Building Your Profitable Tax Lien Portfolio that is available at http://yourprofitabletaxlienportfolio.com.
In Pennsylvania where I invest in tax deeds, for example, I have to worry about whether a property will perk or not. If I buy a lot in a deed sale that doesn’t perk I won’t be able to get a septic design approved and won’t be able to build on the property. Its resale value will be a fraction of the price that I could get for it if it had an approved septic design. In another state you might have other concerns. In dry states, like Arizona for example, you may have to be concerned about water rights.
Don’t be too concerned about which state has the highest interest rate. In states with high interest rates, the interest is typically bid down extremely low. What you should be concerned about is will you have the opportunity to pay the subsequent taxes, and will you get the maximum interest rate on your subs, and are there other penalties that you are entitled to.
In New Jersey, for example the interest rate is typically bid down to 0% and then premium can be bid as well. The reason that investors do this is because they know that once they have the lien, they can pay the subsequent taxes and get the maximum interest rate on their “subs,” which is 18%, and they will also receive a penalty on the certificate amount of the lien.
In Florida where the maximum interest rate is also 18%, the interest is typically bid down to as low as ¼ %. In Florida you are not allowed to pay the subsequent taxes, actually you can pay them, but you do not receive any interest on subsequent taxes, nor will you get any subsequent tax payments back should the lien redeem. However, in Florida there is a minimum penalty of 5%, so if you bid less than 5%, you get the penalty instead of the interest rate that you bid.
Don’t be too concerned about which deed states start bidding at back taxes. The more important thing to be concerned about for deed states is, “what will the competition typically bid the price up to.” In some states, real estate is so valuable and the demand outweighs the supply of affordable homes. In these states (California, Florida, and the Northeast States) any property with a home or business on it will be bid up close to market value. Remember, tax sales are auctions and sometimes people get carried away at actions and pay too much money. Online auctions can be especially competitive, and may California and Florida counties have tax sales online.
To find out about tax sales in your county or municipality go to a sale and see what it’s like. Talk to the tax collector, or whoever is responsible for conducting the tax sale in your area to find out more about how to register for the sale and what the procedures and requirements are for bidding. If you need help determining whom you need to contact, you can consult my State Guide.
My State Guide is available as an e-book along with another e-book on how to invest in tax liens. Both books are available for $39.95. My state guide is different from the other resources that you can get online, because I don’t just give you the type of investment, interest rate and redemption period for each state. I tell you who is responsible for the tax sales in each state, so that you know who you have to contact, and I tell you whether or not you can get information online and give you a link to that State’s website with links to the counties.
What if you live in a deed state and you want to invest in tax liens? I’m in Pennsylvania, which is a deed state, but I’m close to New Jersey, which is a lien state, so I do my tax lien investing there. If you’re not close enough to travel to a state that sell tax liens, is there a state that you vacation in or do business in that sell tax liens? If there is maybe you can right off your next vacation if you go to a tax sale? If not, then you may have no other alternative than to invest online. There are only 2 tax lien states that I’m aware of that have online sales – Arizona and Florida. Arizona sales take place in February and March each year, and Florida lien sales (Florida has both lien and deed sales) are in May and June. Be very careful to do your due diligence on these properties. I don’t advise investing online unless you can go look at the properties or you have someone that can look at them for you.
Here are four action steps that you can take right now to find the best place for you to invest.
Call the tax collector and find out what happens in your state. Do they sell tax
liens, tax deeds, or redeemable tax deeds?
Go to a sale and see what it’s like.
If you are in a deed state and you want to invest in tax liens, then find out what
states sell tax liens, if you need help with this get my State Guide.
Find out about online tax sales at http://www.bid4assets.com.
Bid4Assets has mostly deed auctions, In order to find tax lien auctions online; you will have to go to the county’s web site. For this I recommend going through the links on my State Guide.
If you take the action steps above, then you’ll have a good idea of what state is the best for you to invest in. And if you read my State Guide, you’ll have a good idea of what happens at tax sales in each state. If you need step-by-step information on how to get started, I have a $7.00 Special Report on the 7 Steps to Building Your Profitable Tax Lien Portfolio that is available at http://yourprofitabletaxlienportfolio.com.
Wednesday, May 02, 2007
Tax Deed Investing: Don’t Wait for the Leftovers
I recently went to the Monroe County Judicial tax sale in Pennsylvania. I didn’t actually go to the sale. I came in after the sale to see what was left over. When the sale is over the county gives everyone an hour or so to go to the bank and get the funds to pay for the properties that they bid on. All payment has to be in certified funds or money order, no cash and no personal checks are accepted.
When the time limit is up, the county will re-bid any properties that weren’t paid for along with any properties that didn’t sell in the morning auction. I went to this sale to see if there were any decent properties left over at the end of this final auction. What ever does not sell at this auction goes onto the “repository” list and is sold by private bid. When you buy a property from the repository list, you do not need to clear the title, since the county has taken the property. This can save you some money, since to do a quiet title process with an attorney would cost about $750.00.
There were not many properties in this sale, only 9 properties that were bid, but hadn’t been paid for and 16 that were not sold in the morning auction. Half of these properties were sold in the second auction. The only properties that didn’t sell were either undesirable lots or trailers. Trailers are not worth purchasing at a tax sale because you are only given the deed to the trailer, not to the property that the trailer is on. You will either have to pay rent to whoever owns the land or move the trailer. Undesirable land is also not worth purchasing because you can’t build on it, but you would still have to pay the taxes and any homeowner association fees if it’s in a community.
Basically there was nothing left of any value after the tax sale, so next year I will go to the sale and plan on spending an extra $750 to clear the title on anything that I might purchase. I often get inquiries from people who want to invest in tax liens or tax deeds, but they don’t want to attend the tax sale. They either want to invest long distance, where traveling to the sale is not practical, or they just don’t have the time to go to the sale. They want to know if they can buy liens or deeds through the mail from the leftover tax sale list. This may work in some states where counties have thousands of liens available, but it doesn’t work very well for deeds here in Pennsylvania.
When the time limit is up, the county will re-bid any properties that weren’t paid for along with any properties that didn’t sell in the morning auction. I went to this sale to see if there were any decent properties left over at the end of this final auction. What ever does not sell at this auction goes onto the “repository” list and is sold by private bid. When you buy a property from the repository list, you do not need to clear the title, since the county has taken the property. This can save you some money, since to do a quiet title process with an attorney would cost about $750.00.
There were not many properties in this sale, only 9 properties that were bid, but hadn’t been paid for and 16 that were not sold in the morning auction. Half of these properties were sold in the second auction. The only properties that didn’t sell were either undesirable lots or trailers. Trailers are not worth purchasing at a tax sale because you are only given the deed to the trailer, not to the property that the trailer is on. You will either have to pay rent to whoever owns the land or move the trailer. Undesirable land is also not worth purchasing because you can’t build on it, but you would still have to pay the taxes and any homeowner association fees if it’s in a community.
Basically there was nothing left of any value after the tax sale, so next year I will go to the sale and plan on spending an extra $750 to clear the title on anything that I might purchase. I often get inquiries from people who want to invest in tax liens or tax deeds, but they don’t want to attend the tax sale. They either want to invest long distance, where traveling to the sale is not practical, or they just don’t have the time to go to the sale. They want to know if they can buy liens or deeds through the mail from the leftover tax sale list. This may work in some states where counties have thousands of liens available, but it doesn’t work very well for deeds here in Pennsylvania.
Wednesday, September 13, 2006
Tax Deed Investing: What is an “Upset” Sale?
In Pennsylvania, some counties have two different tax sales; the “upset” sale, and the “judicial” sale. If tax sale properties are not sold at either of these two sales, the property then goes on the “repository” list and can be sold by private bid. The upset sale is held every year in the fall. It’s called an “upset” sale because the minimum bid for the properties in this sale is known as the “upset” price; which includes any unpaid taxes from the county as well as any municipal liens. If a property is not sold in this sale, it is sold in the “judicial” tax sale in the spring. Not all Pennsylvania counties have judicial sales but they all have an upset sale.
What you may not know about the upset sale is that all properties are sold subject to any liens or judgments. That means that if you purchase a tax deed at this sale, you are responsible for any other unpaid liens or judgments on the property. Most people assume that when they buy a property at a tax sale, that they don’t have to worry about other liens such as a mortgage. This is not true at the upset sale. If you plan on bidding at any of these sales this fall, you’d better do your homework!
So how do you find out about other liens or judgments on tax sale properties? There are two ways that you could do this; one is going to cost you some money and the other is going to take some of your time. The first way is to hire a title search company to do a simple title search on all of the properties in the sale that you are interested in bidding on. This could turn out to be a little costly, so it’s not my method of choice. Another reason why I don’t hire a title search company to do title searches for me before the sale is that many of the properties will come off the sale list the day before or the morning of the sale. You may pay for a few title searches that you don’t even need because the properties that you wanted to bid on are not sold at the sale.
Last time I went to the Monroe County Upset Sale, I didn’t even bid on any properties. I researched about 10 of the properties in the sale that were in an area that I was interested in. Through my research I narrowed this down to only two properties that I wanted to bid on. I did all of my research the day before the sale and I had checked that morning to make sure that all of these properties were still in the sale. But by the next morning (the morning of the sale) the two properties that I was interested in had paid and were no longer included in the sale. I’m glad that I did my own research and did not pay a title company to do it!
That brings us to the second method for finding out about liens and judgments on tax lien properties, and that is to do it yourself. There is a little bit of education and some time involved, but it is well worth it. In most states, to do this type of research you would go to the County Hall of Records. In Pennsylvania the office that has the records that you need to search is the office of the Prothonotary. The people in this office are usually very helpful and will help you to look up what you need to know. You’ll have to look for liens and judgments by the name of the owner. If there are co-owners or joint owners, you will want to search under both names.
Keep in mind, however, that if new liens were not yet recorded they could slip through the cracks in the system and you won’t be able to find them. There is always some degree of risk when you buy a tax deed, even if you are careful and do your homework. This is why it is always recommended that you do not buy tax deeds in your own name, but in the name of a separate entity. It could be a corporation or an LLC. If you need help forming a corporation or LLC for the purpose of buying tax deeds, I know of two excellent programs to help you. They were both created by Darius Barazandeh, Texas attorney and tax deed expert. You can find out more about these programs, Incorporate for Wealth, and The Wealth Building LLC on the resources page of taxlienlady.com.
Happy and Prosperous Investing,
Joanne Musa
What you may not know about the upset sale is that all properties are sold subject to any liens or judgments. That means that if you purchase a tax deed at this sale, you are responsible for any other unpaid liens or judgments on the property. Most people assume that when they buy a property at a tax sale, that they don’t have to worry about other liens such as a mortgage. This is not true at the upset sale. If you plan on bidding at any of these sales this fall, you’d better do your homework!
So how do you find out about other liens or judgments on tax sale properties? There are two ways that you could do this; one is going to cost you some money and the other is going to take some of your time. The first way is to hire a title search company to do a simple title search on all of the properties in the sale that you are interested in bidding on. This could turn out to be a little costly, so it’s not my method of choice. Another reason why I don’t hire a title search company to do title searches for me before the sale is that many of the properties will come off the sale list the day before or the morning of the sale. You may pay for a few title searches that you don’t even need because the properties that you wanted to bid on are not sold at the sale.
Last time I went to the Monroe County Upset Sale, I didn’t even bid on any properties. I researched about 10 of the properties in the sale that were in an area that I was interested in. Through my research I narrowed this down to only two properties that I wanted to bid on. I did all of my research the day before the sale and I had checked that morning to make sure that all of these properties were still in the sale. But by the next morning (the morning of the sale) the two properties that I was interested in had paid and were no longer included in the sale. I’m glad that I did my own research and did not pay a title company to do it!
That brings us to the second method for finding out about liens and judgments on tax lien properties, and that is to do it yourself. There is a little bit of education and some time involved, but it is well worth it. In most states, to do this type of research you would go to the County Hall of Records. In Pennsylvania the office that has the records that you need to search is the office of the Prothonotary. The people in this office are usually very helpful and will help you to look up what you need to know. You’ll have to look for liens and judgments by the name of the owner. If there are co-owners or joint owners, you will want to search under both names.
Keep in mind, however, that if new liens were not yet recorded they could slip through the cracks in the system and you won’t be able to find them. There is always some degree of risk when you buy a tax deed, even if you are careful and do your homework. This is why it is always recommended that you do not buy tax deeds in your own name, but in the name of a separate entity. It could be a corporation or an LLC. If you need help forming a corporation or LLC for the purpose of buying tax deeds, I know of two excellent programs to help you. They were both created by Darius Barazandeh, Texas attorney and tax deed expert. You can find out more about these programs, Incorporate for Wealth, and The Wealth Building LLC on the resources page of taxlienlady.com.
Happy and Prosperous Investing,
Joanne Musa
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