As of early 2021, tax lien investors in the United States can look for certificate or deed opportunities in virtually any state. Even though the U.S. does not really have uniform property laws across all jurisdictions, legal analysts believe that statutory similarities will continue to develop over the years, thus opening more doors to investors who seek to profit from tax lien auctions and sheriff's sales.
Not all states handle property tax delinquencies in the same manner, and this has a lot to do with the way their laws governing property are formulated. In some cases, revenue collection agencies at the county level will operate differently with regard to sheriff's sales and the issuance of tax lien certificates, but they all have to abide by state laws. The reason why there is no uniformity in the management of tax lien certificates has to do with property, probate, and even business formation statutes. Some states are more flexible than others in terms of how they allow residents to transfer real property; at the same time, some states are reticent to enact adverse possession that may lead to a deed being placed on the auction block.
As can be expected, all states have a real and present interest in collecting property taxes in a timely manner; after all, this is how they formulate their budgets. The National Tax Lien Association promotes the ethical, lawful, and competitive management of tax liens, and its directors have noticed that many jurisdictions are taking steps in the right direction to the benefit of prospective investors.
With all the above in mind, here are some states that tax lien investors should pay attention to as they look for lien certificates and deeds that are worth bidding on.
We have to mention the Sunshine State at the top of this list for various reasons, and the most important is the diversity of real estate. Florida is a place where there is no shortage of waterfront properties; some of them are situated along the Gulf of Mexico while others face the Atlantic Ocean. You also have lakes, rivers, and even the Florida Keys with homes that offer views of the Caribbean Sea. For the most part, Florida is a middle-to-high income jurisdiction, which means that homes tend to be on the nicer side.
There is still plenty of undeveloped land in Florida, and builders are always looking for the next spot where they can start construction of a new gated community, subdivision, or apartment complex, which is why many tax lien certificates in Florida are for undeveloped lots. Socioeconomic activity in this state is always high; Floridians tend to go through ups and downs in terms of employment and business opportunities, and this explains the high rate of property tax delinquency. In many cases, foreign buyers may have acquired a lot or a condo unit near the beach as an investment that did not work out, and which they chose to abandon in the end.
The typical interest rate on Florida tax lien certificates is 18%, but investors should expect plenty of bidding competition in some of the most attractive countries such as Broward, Palm Beach, Miami-Dade, Pinellas, Manatee, and Sarasota. When you register for a sheriff's sale in Florida, you should not be surprised to see bidders fighting for a tax lien certificate that is only worth about 8%; this happens because quite a few Florida properties are very attractive, and everyone hopes to get a shot at filing foreclosure papers and getting their name on title.
Florida is a judicial foreclosure state; this means that you have to go through the courts in order to gain possession of the property if the homeowner failed to repay the certificate within the legal term of two years. Going through a foreclosure in Florida used to be a nightmare because of the numerous law firms that practice foreclosure defense, but this is no longer the case. Circuit courts across the state have gotten their act together with regard to handling foreclosure cases, and they no longer fall for frivolous defenses.
Anecdotally, some tax lien investors who have sat down with Florida homeowners to learn about their situation find out that they are foreigners getting ready to return to their home countries; in some cases, they are families who fell prey to predatory mortgage brokers, and they end up becoming frustrated with high payments. In these cases, investors may be able to convince the homeowners to move out in exchange for a cash payment; this would make the foreclosure process easier because it eliminates the need for eviction. Another advantage of investing in Florida tax liens is that you can retain a law firm that can not only represent you in foreclosure court but also work towards giving you a clear title to the property once all liens and encumbrances are dealt with.
Finally, it must be mentioned that many counties in Florida hold tax lien certificate auctions online; plus, deed auctions are also held for properties that can no longer go through the certificate process, which means that you can actually walk away from the auction with your name entered on the deed, thus putting you a step closer to the title.
Similar to Florida, the tax lien interest rate in Maryland is 18%, but there is no regressive bidding at the auction; instead, investors bid on certificate premiums, but only a portion of the premium must be paid initially. Unlike Florida, only a few counties in Maryland hold online tax lien auctions; the most enticing in this regard is Baltimore, which has a huge annual event. In some Maryland counties, the repayment term is only six months, which means that you could be filing for foreclosure sooner than expected, and the process can be handled out of court through non-judicial means, but this does not mean that it will always be easy.
Uncooperative homeowners in Maryland have ways to move a foreclosure case to the courts with the right lawsuit filing; when this happens, things could get complicated for the tax lien investor unless he or she is able to retain adequate legal representation, especially if the homeowner is basing the lawsuit on an obscure title issue. It really pays to conduct due diligence in Maryland, especially around the Baltimore area, because quite a few properties have fallen to severe levels of distress.
The greatest advantage of Maryland for tax lien investors is that part of the state falls within the Northern Virginia and D.C. housing market, which boasts some of the highest property values in the country because of high demand.
There are not that many counties in the Canyon State, and only six of them are set up for online tax lien certificate auctions. Maricopa County is where all the tax lien action is, and bidding starts at the 16% interest rate, but competition is not as fierce as in many Florida counties. Arizona is known to be a housing market where homeowners are interested in keeping their properties, particularly in vibrant cities such as Phoenix and Scottsdale, so you have a good chance at collecting double-digit interest rates. Quite a few of the listings that end up in Arizona tax lien auctions are undeveloped lots near the desert; this is when due diligence pays off because some counties will expect certificate holders to continue making tax payments past the term and until the end of the year.
Some tax lien investors find Indiana to be a confusing state because some counties offer two auctions, one of them handled through the County Commissioner's Office. You are virtually guaranteed a double-digit interest rate on Indiana lien certificates, and the amount due is often reduced if the matter is elevated to the Commissioner's Office. The normal repayment term is 12 months, but it can be reduced to just 120 days in some cases. More Indiana counties are moving their tax lien certificate options online.
Indiana is a judicial foreclosure state, but the courts tend to be far more organized when compared to other states such as Florida. The Indianapolis housing market is vibrant and active, which means that there are good opportunities for the right investor.
Scouting Tax Lien Auction Opportunities Across the U.S.
Now that you know some of the best states where it makes sense to invest in tax lien certificates, the next step you should take is to contact our office and arrange a real-time demonstration of Marketplace Pro, a software solution that can give you an edge by showing exactly where these properties are located. Similar to the Multiple Listing Service (MLS) used by realtors in the United States, Canada, and Mexico, Marketplace Pro gives you not only the location of properties on the auction block but also additional information that can guide you towards the right decision.
Getting the right information prior to registering for a tax lien auction can save you considerable time and money.
When you get to see what Marketplace Pro can do, you will be able to take your tax investing activities to the next level. Contact us today for a free software demo!