Buying Tax Liens Online

onlineMore and more states are moving to online auctions for tax defaulted property. This means you can buy tax liens online from anywhere in the world.

All you need is an Internet connection, an understanding of how the auctions happen and knowledge that the property is worth your investment. In other words, know the rules and do your homework.

The first step is to find tax defaulted property auctions that are held online. Some states don’t have online auctions. Because the list of states and counties that hold online auctions is changing all the time, you’ll just have to search to find online auctions. Most California counties hold their auctions online.

WHY ONLINE?

The purpose of holding a tax defaulted property auction is to collect the past due taxes. A public auction is held to make sure the sale process is open and aboveboard. The more people who can participate, then the more open the sale is. A public auction means the tax collector can’t make under-the-table deals to sell the property. By holding the auction online, the process becomes even more open.

Anyone in the world with an Internet connection and the money to invest can participate in an online tax defaulted property auction. You just have to know the rules.

WHAT ARE THE RULES?

The rules for online auctions are different for every state that allows online auctions. Every county can also set addition rules for its own auction. Orange County, CA, is moving toward online auctions. San Bernadino County, CA, holds online auctions.

Some counties hold the online auctions themselves. Some counties contract with a private firm to conduct the auction. In California, Bid 4 Assets conducts most of contracted online auctions. Bid 4 Assets also conducts tax defaulted property auctions in other states.

This is why you must know the rules for every county. What works in one county will not work in another county.

Fortunately, getting a list of the rules is easy. Just find the county where you want to invest and search online or call the tax collector office in that county. Ask:

• When is the next auction?

• What are the registration requirements for the auction?

• What are the rules for paying for a winning bid?

• How to obtain the list of available properties.

The county may not have an auction scheduled. If that happens, go to another county. Keep searching until you find one. When you find an auction and get the list of properties, you must do your homework.

WHAT IS THE HOMEWORK?

Your pre-auction homework is checking out the property. Bankrate, a website for people who invest in real estate, puts it this way, “Scope out the property.” The article Buying a home in a tax lien sale discusses several more important points you need to know about.

“Make sure there’s a house on the property and that it’s still there when you bid,” says James Hughes, president of SRI Inc., which helps governments conduct tax defaulted property auctions. “The house could burn down or be damaged by something like a flood. If you paid $5,000 and the land is worth only $2,000 after the home burns down, you’ll lose money. That doesn’t happen very often, but it has happened.”

Making sure there is a house on the property is easy. Check online resources. Then, check out the property. One way is with Instant Street View. Just be aware the pictures may not be current. Instant Street view can also give you a very good look at the neighborhood. The real estate information website Zillow will give you a lot of information about a property. I have two videos on my website, Members.TedThomas.com, that teach you everything you need to know about using Zillow. I also have more videos that teach you everything you need to know about property research. Once you join, you can watch the videos as often as you need.

WHAT IS A TAX DEED AND A TAX LIEN AUCTION?

The two basic tax defaulted property auctions are tax deed and tax lien auctions. You can make big profits by investing in either kind of auction. Both types of auctions are held online. You must remember the rules for each county’s auction are different. Know the rules for the auction so you can be successful and make big profits.

A tax deed auction means you are buying the property.

A tax lien auction means you are buying the right to collect the past due taxes.

Tax Deed

Texas holds tax deed auctions. Denton County, TX, describes the tax defaulted property auction as: “The property will be sold at public auction to the highest bidder, based on oral bids.  The rules covering auctions generally will apply.” Denton County refers to these sales as a “Sheriff’s Sale” because the sheriff’s office serves the foreclosure papers from the tax office.

You must know the rules. In some states when the auction paperwork is completed and you get the deed from the tax office, you own the property. Some states, like Georgia, sell a redeemable tax deed. The Fulton County, GA, tax commissioner explains the Georgia tax defaulted property auction this way, “When real property is sold at a tax sale, whether to an individual or to Fulton County, the owner, creditor, or any person having an interest in the property may redeem the property from the holder of the tax deed.

“The owner, creditor, or any other person with an interest in the property may redeem the property at anytime during the twelve (12) months following the tax sale. The purchaser of the tax deed cannot take actual possession of the property during this time and the tax deed purchaser is not authorized to receive rents or make any improvements to any structure on the property or grade any lot prior to this time.”

Other states with redeemable tax deeds have different rules. You have to know the rules. The amount of time a homeowner has to redeem the property varies from state to state. About 95 percent of tax liens and redeemable tax deeds are redeemed by the owner.

The Fulton County tax commissioner also explains how a property may be redeemed in Georgia. “The owner, creditor, or any other person with interest in the property, must pay the tax deed purchaser, the amount paid for the property at tax sale, plus 20% premium for the first year or fraction of a year, plus any taxes paid on the property by the purchaser after the sale, plus any special assessment on the property, and a 10% premium of the amount for each year or fraction of a year, which has elapsed since the date of sale plus costs.” The redemption process is different in other states. This is why you have to know the rules.

A 20 percent return on your investment is a good return.

Tax Lien

Some states sell tax liens at the auction. Realtor.com, the website for members of the national Realtor association, says a tax lien auction “is when the liens are auctioned off to the highest bidder. The highest bidder now has the right to collect the liens, plus interest, from the homeowner. If the homeowner can’t pay the liens, the new lien owner can foreclose on the property.”

Interest rates vary. Ohio offers 18 percent, according to the Cuyahoga County treasurer’s office. The interest you can earn can be higher or lower. “The interest rate ranges from 5 percent to 36 percent, depending on the state,” says an article at Bankrate.

MORE TO KNOW

Here’s a I produced that tells you more about how to buy tax liens online. There is much more to share and to know. You can learn everything you need to know at my website Members.TedThomas.com.

Ted Thomas is a Florida-based author and publisher who specializes in tax defaulted properties. Visitors to his website www.tedthomas.com will find 3 must see FREE instructional videos. No credit card required. The video lessons will give you everything you ever wanted to learn about government tax defaulted real estate which is sold at public auctions for 10 cents to 20 cents on the dollar. You’ll also learn the secrets of tax lien certificates which pay guaranteed returns of 16%, 18%, up to 36%. Go to www.tedthomas.com for more information.