How to Invest in Tax Deed Sales Before Auction
- 1). Subscribe to an online database with nationwide listings of tax lien sales. Although some of the information provided by such websites is free, you will need a paid subscription to obtain detailed information about the properties that are subject to tax liens.
- 2). Make a short list of properties you are interested in, focusing on property located in states with one-year statutory redemption periods (so that the property owner will have less time to pay off the tax lien).
- 3). Narrow your short list by comparing the amount of each tax lien with the value of the property it is attached to (as appraised by the county government). You may have to find the county government website and contact the county property tax assessor to obtain the appraised value of the property. The higher the value of the tax lien compared with the appraised value of the property, the more likely it is that the owner will fail to pay off the tax lien in time to avoid foreclosure (and the less you will profit from a foreclosure).
- 4). Attend tax lien auctions for the properties that you remain interested in, bid on the tax liens, and purchase tax lien certificates from the appropriate county governments. The price you will have to pay may be considerably more than the amount of the outstanding property tax debt due to competitive bidding. At this point you will be the creditor, and the property owner will be your debtor. In most states, unusually high interest rates apply (often over 20 percent per year).
- 5). Take payments from the debtor and wait for the statutory redemption period to expire. If the property owner pays off the tax lien in time, you will not receive title to the property, but will profit from the high interest rate. If the property owner fails to pay the full amount of the tax lien by the deadline, you may foreclose on the property and take title to it.