Before You Go To Your First Tax Lien AuctionYou must have a fair idea of everything that happens at a tax sale if you want get the best deal out of a tax lien auction. Keep in mind that the process differs from every county to county and from every state to state. On the other hand if you are going in a tax deed sale, pretty much the same things shall happen in all the states. Be sure to ask the proper tax question from your tax consultant before you bid in any tax foreclosure auction. The very basic thing is that detailed information about the property is provided to the people who want to place a bid. This allows them to make decision about which property they would like to place a bid and which property they would let pass. Once the information is provided, the bidding process begins in the same order in which property has been listed. The order of listing generally varies from state to state and from county to county. The actual process of bidding in Nassau County, New York, Arizona, Florida and Illinois is that the interest rate is bid down. The rest of the states and counties follow a different procedure. They keep the interest rate constant and it is the price of properties which is bid up. The excess amount that successful bidder has to pay in order to claim government tax lien is known as the premium or the over bid. The premium over the county tax lien is managed differently in all the states. Some states like Alabama and Indiana, allow you to get interest on the amount you paid as a tax lien. West Virginia and a number of other states have no such provision on tax foreclosures. States like Colorado and Vermont do not even bother to pay any interest on the premium, nor do they care to return the premium in case the original owner of the property reclaims it. In New Jersey, the picture is altogether different. Not only that the interest rate can be bid down to zero, the premium is also subject to bidding at the tax lien auction. The state allows a five year period of redemption. In case the original owner reclaims the property, the government of New Jersey is considerate enough to return the amount that was paid as the premium. The variety is not over yet. There are some states which take an altogether different route. The investor has to make the bid for a percent ownership in that property. The ownership is available in case the lien has to be foreclosed. The person who is ready to bid for the lowest ownership percentage wins the bid. This process is very complicated and such tax lien auction is to be avoided to the maximum possible extent. |