The county treasurer usually collects property taxes. If property owners fail to pay the taxes, a lien is placed on the property. The county treasurer may have several options to collect the past due taxes. In some states, the property is sold at a public tax lien auction. In other areas, tax lien certificates are sold by auction to investors. The bidding procedures differ depending on the type of auction and the local, county and state laws.
Tax Lien Auction
When the property taxes haven’t been paid for a specified number of years, a tax lien auction is scheduled. Some counties hold a live auction where bidders are required to attend in person. Many counties contract with auction companies to hold online auctions. Sometimes counties offer a sealed bid sale. In large counties, tax lien auctions are scheduled on a regular basis. In smaller counties, the auctions are held every few years.
Prior to the Auction
Information about tax lien auctions appears in local newspapers prior to the auction. The county tax collector often prepares a packet of information about the tax lien properties. This information is also often found online. Carefully read the rules for the auction. Many counties require potential bidders to register before the auction. The bidder’s name, address, phone number, Tax ID number and other information are collected. In some counties, prospective bidders must pay a deposit prior to bidding.
Bidding at the Auction
Completely research the property offered for sale at the tax lien auction. If attending a live auction, arrive on time and prepare for a fast-paced auction. If bidding online, carefully check the ending date and time. Many counties require full payment at the conclusion of the auction. Arrange for sufficient funding and make the highest bid at the auction.
Tax Lien Certificates
At a tax lien certificate auction, investors buy tax lien certificates. The buyer doesn’t take ownership of the property. Rather, the buyer pays the past due taxes to the county on behalf of the property owner. The property owner then has a period of time to pay the past due taxes and interest. If the property owner fails to make the payment, the holder of the tax lien certificate may eventually take ownership of the property through the foreclosure process.
Tax Lien Certificate Auction
Carefully read the auction rules. The rules vary by state and county. In some counties, the lowest bid buys the tax lien certificate. Investors bid on the rate of interest connected to the tax lien certificate. The investor with the lowest interest rate bid takes ownership of the certificate.
Kim Dieter has taught agriscience classes, developed curriculum and participated in the school accreditation process at the secondary and community college levels since 1980. She holds a Master of Science degree from the University of California, Davis, in animal science.