Identify If Tax Lien Investing is Something you would enjoy
Before you can even decide to get involved with tax lien certificates, you should understand the rewards involved as well as the risks.
You need to realise some typical terms and methods like bidding down the interest, bidding on the premium, bidding on the ownership and redemption periods. When you get to the point where you have a good understanding of tax lien investing you should then determine if this suits your personality.
If you feel that being a tax lien investor is in your future, keep reading!
Locate a good Tax Lien Web Site
Locating a website to buy tax liens is actually easy to do. Tax lien sales are processed at the courthouse so you should probably start by finding the website of tax collector for county you want to invest in.
You could use the google search engine and enter terms like “buy tax liens in texas” or “counties in texas with tax lien sales.” Replace texas with whatever state you are interested in. For example, if I wanted to invest in a county in Florida I would type in “Florida Tax Collector” in the Google search engine.
This will provide you with a list of results that will allow you to either contact the tax collectors office directly OR (if available) sign up for auctions online.
Join A few Tax Lien Websites
Note: You will only be able to register in certain counties as not all counties have online tax lien sales.
Be ready to fill in personal information about yourself such as your social security number, bank routing info or credit card info for funding and payment purchases, this is normal. You may also need to fund or provide funding for your account which will be used to purchase the Liens if you win a successful bid.
Understand how the Tax Lien Bidding process works
There are different ways to bid on tax liens during an auction. In the event that there is more than one tax lien investor one of several bidding methods are used.
Depending on the laws of the county, the bid winner will be determined by one of the five methods below. Bid Down the Interest.with this method, investors will bid against each other to see who will accept the lower interest rate. In some cases the interest rate can go as low as 0%, but this is rare.
Premium.Here investors (bidders) bid on the face value of the lien or premium. In some counties the additional premium does not earn any interest and may not be refundable. Colorado is one state that does this.
Random Selection.the order of bidders is selected at random with the random selection method. It is common for a computer to do the random selection, however in smaller counties other methods may be used. Nevada uses the random selection method.
Rotational Selection. Using this method the liens are offered to the bidders in sequential order. If the first bidder passes on the lien, the next bid ticket holder gets priority of the lien. Bidder 1 will have to wait until all the other bidders have had a chance to bid before his or her turn comes up again. The next lien then goes to the next number in line.
Bid Down the Ownership. A few states use this method of bidding on the ownership. The winner is the investor willing to accept the least % ownership on the lien. An example of this would be a case where the winning bidder only owns 60% of a tax lien. If the lien is not redeemed, the bid winner only receives 85% ownership of the property with the remaining 15% owned by the original owner. Not many investors will buy liens in states that use the ownership method.
So in case where multiple investors are bidding on the same property, the random selection process will be used instead. Liens not sold at auction are considered “struck” (or sold) to the entity (usually the county) conducting the auction. Some states allow “over the counter” purchases of liens not sold at auction.
To learn more about tax lien basics, then visit Dale Poyser’s website to learnhow to buy tax liens online.
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