Ohio is a hybrid state, meaning they have both property tax lien sales and tax deed sales. The two property tax sales are very different. This article focuses on the tax lien auction. To learn about tax deeds, read this article I wrote.
What Does Tax Lien Mean?
Both tax lien sales and tax deeds give you the chance to make big profits, but the lien means you don’t immediately own the property. You own the right to collect the past due taxes plus interest. If the property is not redeemed however, you may wind up owning it.
According to state law, any Ohio county can hold a property tax lien sale. As of now, 34 counties have lien sales, but more are considering it. The other counties hold deed auctions. The auctions are often called Sheriff’s Sales.
What Happens If Owners Don’t Redeem Their Liens By Paying Their Back-taxes?
On average, 95 percent of tax liens are redeemed by the owner. Redeemed means the property owner pays you for the past due taxes and the interest you are allowed to collect. The other five percent that is not redeemed means you get the property after a foreclosure process.
You just need to do your homework and understand the rules before you begin investing. My website is packed with videos and articles that teach you how to make big profits by investing in tax defaulted property auctions.
Want to learn how you can make big profits from bargain real estate? Would you like to buy homes for pennies on the dollar? Or earn double-digit interest rates? Learn how to secure your financial future with this FREE mini class today!
Why Do Counties Issue Tax Liens? Is It Legal?
Edward Leonard, Franklin County, OH, treasurer makes this clear: “The purpose of the annual Tax Lien Sale is to collect the delinquent real estate taxes owed to the County’s school districts, agencies and local governments.”
Local governments, like those listed here, depend on property taxes to operate. If property owners do not pay their taxes, Franklin County goes through a collection process to try to get the money. The final step, for the county, is the tax defaulted property auction, the tax lien sale. This is legal. The US Supreme Court has upheld tax defaulted property auctions several times.
How Much Time Does an Owner Have Before the County Sells Their Property?
Findlaw, a website that examines the law and provides Supreme Court case decisions, reported on theMennonite Board of Missions v. Adams.
In this case, the High Court examined how much notice a property owner must get before the county sells the property for past due taxes. The case was in Indiana. Since it was decided by the US Supreme Court, it applies across the nation.
The majority decision says in part, “The tax sale is followed by a 2-year redemption period during which the ‘owner, occupant, lienholder, or other person who has an interest in’ the property may redeem the property. To redeem the property an individual must pay the county treasurer a sum sufficient to cover the purchase price of the property at the tax sale and the amount of taxes and special assessments paid by the purchaser following the sale, plus an additional percentage specified in the statute.”
In other words, the High Court said the auction was legal. The Court also said the person buying the property, or the lien, is allowed to make a profit. In Ohio, the buyer gets 18 percent interest. If the owner redeems the property minutes after the auction, he still has to pay 18 percent interest.
Know Ohio’s Auction Rules
Each county decides when it will have a tax defaulted property auction. State law sets out how the auction must be announced and how property owners have to be notified.
Beyond that, each county has its own rules for its tax defaulted property auctions. For instance, Franklin County holds auctions in the second week of November. Mr. Leonard said notices become available in early September.
This means you have a little time to prepare for the 2016 auction in Franklin County. Stark County holds auctions on the first Monday of the month year round. Delaware County holds auctions at irregular intervals according to the dates of past auctions.
Franklin County requires registration and a $500 deposit prior to the auction. If you don’t buy something at the auction, you get this money back. If you win an auction, that money is applied to your purchase.
You also have to pay at least 10 percent of the purchase price on the sale of the auction. You have five days to pay off the balance.
Cuyahoga County does not require a deposit, but does require registration. Cuyahoga County has three levels for paying for whatever you win at auction:
• If the property sells for $500 or less, you have to pay the total amount the day of the auction
• If the property sells for $501-$5,000, you must pay at least $500 on the day of the auction.
• If the property sells for more than $5,001, at least 10 percent is due the day of the auction. You then have 14 days to pay off the remainder.
Stark County requires you to pay at least 10 percent of the winning bid on the day of the auction and gives you 30 days to pay the rest.
A complete list of the rules for Cuyahoga County is available in this PDF download from the county fiscal office. A complete list of the rules for Franklin County is available at the county treasurer’s website. You need to contact the Stark County treasurer for their list f rules.
Most of the Ohio property tax lien sales are done in person. If you do not live nearby, you can hire someone to attend the auction on your behalf.
Every county in Ohio sets rules for its property tax sales. You have to do your homework to be successful in these auctions. Find the tax office in every county in Ohio at County Treasurers Association of Ohio.
How Can I Find an Ohio Tax Sale List?
The first step is to decide which Ohio county to invest in. Ohio has 88 counties. Wikipedia, an online encyclopedia, has a list of all the counties. You can go from there to learn more about each county to decide if it is a place you want to invest in.
You can find announcements about tax defaulted property auctions in Ohio in three places.
Newspapers
The notice of the coming auction has to be advertised in the local newspaper. The announcement will appear in the legal notices section of the newspaper. The Ohio Newspaper Association allows you search for newspapers by county, name or city.
Online
Tax defaulted property auctions have to be advertised in the local newspaper. The Ohio Newspaper Association also publishes the notices online at Public Notices Ohio. Not all Ohio newspapers use this website, but more and more use it every month.
The Tax Office
Every county in Ohio has tax defaulted property auctions. Some hold tax deed sales and some hold tax lien sales. You can contact the treasurer’s office to find out which sale that county holds. If you contact that office, you should also ask about the rules for the auction. The County Treasurers Association of Ohio can direct you to each tax office in each county.
What ‘Homework’ Do I Need To Do Before I Bid?
A key part of making big profits and being successful when investing in Ohio property tax lien sales is property investigation. Is the property worth what you have to spend at the auction? Here is a short article I wrote about some of the things you need to know.
Here are some other points to consider:
• Do you want to own the property? About 95 percent of property sold in a property tax defaulted auction is redeemed. That does mean about five percent is not redeemed and the buyer owns the property.
• If the property is not redeemed, do you have a plan for owning the house? Can you sell it? Can you rent it?
• What is the property really worth?
You can learn much more at my website. The videos and the experts tell you how to:
• Check the property using aerial and street view programs
• Research property records
• Use the real estate guide and advice website Zillow.com to do more research
Big profits are waiting for you in Ohio, but you have to do your homework and know the rules.
Ohio Rules:
Foreclosure of the tax lien certificate parcels is governed by Ohio Revised Code §5721.37 Foreclosure cannot commence until one year from the date of sale of the tax lien certificate, unless a property is deemed to be vacant and abandoned. The lien holder may secure private counsel to initiate foreclosure or utilize the County Prosecuting Attorney Office to prosecute the foreclosure actions.
The prosecuting attorney may charge the tax lien certificate holder a fee to cover the cost of prosecuting the foreclosure action. The fee may change from year to year.
Calculation of Interest
As mentioned previously, the interest rate of the successful bid applies to the entire amount of each lien, including the administrative fee. Interest will be calculated on a simple interest basis with 1/12 of the annual interest applied on the first day of each month. Interest is not calculated on the premium bid on the entire portfolio.
Additional Notes:
Real property cannot be sold for the dollar amount owed in back taxes. However, if the taxes owed are two years delinquent and a payment plan has not been followed to bring the taxes current, the property may be sold at Sheriff’s sale by the Treasurer, for 2/3 of the appraised value, unless the taxpayer has filed bankruptcy protection. Tax lien sales are not conducted in Erie County.
Please Note: All eligible liens will be auctioned as a single block. The county does not sell individual tax lien certificates. As in all Ohio counties selling tax certificates, the bulk sale or auction of tax certificates in Hamilton County is not designed for individual investors.
Ohio Revised Code sections 5721.30 to 5721.43 permit the Franklin County Treasurer to collect delinquent real property taxes by selling tax-lien certificates in exchange for payment of the entire delinquency. All eligible tax-lien certificates are bundled together and sold as part of a single portfolio.
The Treasurer’s liens are transferred to the purchaser, who is entitled to recover the purchase price and accruing interest. Unlike other states, Ohio law does not provide for the sale of individual tax lien certificates or “over-the-counter” liens.
All available liens will be auctioned as a single block for a purchase price estimated to be several million dollars. Tax liens will not be sold individually and Franklin County does not sell “over-the-counter” liens. As in all Ohio counties selling tax certificates, the bulk sale or auction of tax certificates in Franklin County is not designed for individual investors.
Interest is not calculated on the premium bid on the entire portfolio.
If you’d like to learn more, I’m offering my Master Course as a gift. It’s an online course about tax lien certificates and tax deeds, valued at $197, but I’m giving it to you for free.
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All reasonable efforts have been made to ensure the accuracy of the information presented in this article. Laws and regulations may change and you must be knowledgeable in the current laws and regulations of any tax defaulted property auctions. Website links may also have changed since this article was written.
