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Procedures for Tax Lien Sales Differ from State to State

Written by: Kathy Weeks

Tax Lien Sales Differ from State to State
If you have decided to participate in tax lien investing, you should be prepared by understanding what happens in a tax lien sale. The exact procedures for tax lien sales differ from state to state. This article will discuss what goes on at a tax lien sale to best prepare you for this experience.

Tax Lien Sales are Competitive
Tax lien sales typically take place at the county clerk's office. You will have to register for the sale before participating and fill out the necessary paperwork. Because the IRS requires notification, you will have to fill out your W9 form as well. Tax lien sales are a competitive environment and you will find yourself competing with other investors for each tax lien certificate.

Some States Hold Tax Lien Auctions
The best properties are called premium properties and as the name would suggest fetch a premium. In some states, a tax lien sale involves bidding over the amount of the lien, with the highest bidder being awarded the tax lien certificate. In other states, the interest rate is bid down from standard state guidelines. In other places still, there is no bidding at all on certain properties and a tax lien sale is done in a "round robin" fashion by random. In the state of Kentucky, there is no auction at all and the first person to pay the tax lien is awarded the tax lien certificate.

Some States Require you to Register Just to Sit In on a Tax Sale
Before you visit a tax lien sale, you should familiarize yourself with the requirements in your state and county. Unfortunately, you can't typically just sit in and watch a tax lien sale without first registering. You can however register and sit out your first time to get a feel for how things operate in your area.

You Don't Always Have to Attend a Tax Sale to Purchase a Lien
It is also possible to purchase tax liens by mail. Typically, these are the less desirable properties that did not go up for auction at the time of the count sale. If you plan on taking the mail approach, it would be wise to do some degree of due diligence in to the properties that you are interested in purchasing the tax lien certificates for. Some times, the properties are undesirable to investors for a good reason. They may be in a bad neighborhood, be completely run-down or have other liens against them. While bad investments are not common in tax lien investing, there are some properties that are not worth your time.

Most States Require all Liens to be Paid in Full on the Date of the Auction
Remember that when you are participating in a tax lien sale, you will need to have the funds available to pay the tax in full on that date. Be sure to prepare yourself prior and do your research before attending your first tax lien sale.

Governments Overcoming Losses: Tax Sales

There are several steps that lead to a successful tax sale. The first of which, of course, is the property owner failing to pay taxes.

 

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