United Tax Liens Blog

Online Tax Auctions

Online Tax Auctions

Online tax lien auctions are a fantastic way to participate in the creation of tax lien certificates. When investing in tax liens, it's essential to know how to acquire your liens. Many options exist to give investors access to these certificates. You probably know that real estate has long been the playground for the rich and well connected, and that according to recently published data, it's also been the best performing investment in modern history. And with a set of unfair advantages that are completely unheard of with other investments, it's no surprise why. But those barriers have come crashing down – and now it's possible to build REAL wealth through real estate at a fraction of what it used to cost, meaning the unfair advantages are now available to individuals like you.

Getting Started with Online Auctions

Every state has specific rules governing how tax liens are processed. To participate, one must first know the county you want to bid in. Once you have selected your county, simply login to the tax collector website and look for “Online Auctions.”

Inside the auction home page, investors can register to participate in the auction by following the steps outlined. Usually, this requires registration for a county bidder number. The bidder number registration requires tax lien investors to fill out an application with the necessary personal, banking, and financial information. After the application process is complete, you can bid at any online auction in the county. Auctions dates vary, so check the local listings on the website.  

The Pros of Online Auction

There are some significant benefits to buying virtually, particularly in today's environment. First, there's the health benefit. You don't have to venture out to a crowded auction house or shoulder-to-shoulder conference room, and you can bid on properties safely from the comfort of your own home. More than this, there's also the convenience factor. You don't have to drive or take time out of your busy schedule (or away from your family), and you can bid quickly and easily on the fly — even while doing other activities. Finally, there are the opportunities it affords you. 

With virtual auctions, you're no longer limited geographically. You can participate in auctions in any market and time zone, no matter where you're located. This could mean more potential deals (as long as you're committed to looking).

Importance of an Insurable Title

Insurable title usually means that they will provide title insurance with notable exclusions. If there are clouds on the title, their title insurance company will provide insurance that excludes those issues. Therefore, that means it's insurable—but not “marketable.” What does that mean? There may be improperly discharged mortgages, unrecorded death certificates, or any number of other issues. Some issues are a big deal; some are not. But the best time to clean up those issues is before you buy it, not afterward.

Why is that a big deal? You want to sell to an end buyer, and that end buyer's lender probably won't find those exclusions acceptable. You'll be stuck cleaning up the title when you have no leverage with the bank that sold it to you. The bank has no incentive after closing the sale to you, either. They have your money and are done with it.

Cons of Online Auctions

Virtual auctions do have their perks, but there are also some significant downsides. For one, there's the added competition they create. With properties available virtually, you're no longer competing against Jim and Bob down the street; instead, you've up against dozens, maybe even hundreds, of other investors from all over the country. This could make it harder to find a property or, more importantly, get a good deal on one. There's also the added risk of buying sight unseen. If you're looking at properties in different parts of the country, you're unable to do even the bare minimum physical evaluation. There's no driving by, peeking in the windows, or checking out the neighborhood. This could mean getting a lemon property—and not knowing it until well after you've put down the cash.

Reserve Price and True Market Value

The online bid price is meant to attract your attention. It is not necessarily the sales price you will pay and might have little relationship to actual market value. The estimated bidding price might be 50% to 75% of the amount the seller hopes to receive. It's a starting point for the auction and usually lower than what the seller will accept.

Many auction websites will post the estimated market value. To determine true value, you will need to examine comparable sales. These are the sales prices of similar homes that have recently sold. These are not the sales prices of homes for sale—because sellers can ask any price they want, it doesn't mean the home will sell at the asking price. Only the final sales price of a closed sale within the past few months is a comparable sale.

Reserve Price and True Market Value

Florida is a state that is worth looking at for online tax lien sales. The interest rate in Florida is 18% per year. Some counties in Florida do have online tax lien sales. However, online auctions are held once a year in May, and the interest rate is relatively low, but there is a minimum 5% penalty, so regardless of how low you bid, if the lien redeems, you will get at least 5% on your money.  

Another plus for investors who do not live in the state is that you are not likely to get the property if you do your due diligence and bid on solid property choices. Instead of foreclosing on the property if the lien doesn't redeem, you apply for the lien to go to a deed sale using the Tax Deed Application process.  

The property will then be auctioned off in a tax deed sale (some of these are online) to satisfy the lien and gain back all interest and fees owed to the investor. 

Investors who participate in these online auctions must bid against other investors in the bid down process. The opening bid will begin at the total tax bill for the previous year with an 18% interest rate attached. As bidding proceeds, the bids will decrease the interest rate by .25% increments, and low bid wins. Winners of the bid will receive an online tax lien certificate that holds the associated interest rate for a life of 7 years.

About The Author


United Tax Liens is a group of experienced, active investors providing everyday people with access to one of the best Real Estate Investment vehicles available today.

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