United Tax Liens Blog

What Are Tax Lien Auctions?

What Are Tax Lien Auctions?

Looking to buy a property at an auction? There are alternative ways to buy besides the traditional channels of searching real estate listings and working with real estate agents. You can also purchase a property at auction.

Buying a home at auction is riskier than buying through the usual process. It is vital to be well educated about how real estate auctions work.

  • You can find home auctions through local governments, real estate agents, and online sites such as and
  • Auction properties often do not allow a home inspection or any legal way to view the interior in person. If you cannot afford the risk of buying a property in poor condition, stick with auctions that allow you to inspect the property before bidding.
  • Review and understand all auction rules and do your due diligence on any property you are interested in—for instance, check for claims, liens, and occupants before you bid.

The benefits of buying at auction include expanding your options and possibly purchasing at a discount. You may face less competition to buy an auction house compared with buying in the traditional way, but you will also be dealing with a different pool of potential buyers—often, experienced investors.

Perhaps the biggest risk of buying at auction is that you will have limited knowledge of the properties for sale, making an expensive misstep a real possibility. Also, as with any real estate purchase, you will need to read, understand, and sign lots of paperwork (ideally with the help of a real estate attorney).

Real-estate lore is rich with tales of homes bought at auction for well below market value, and such bargains do exist. However, auctions are typically a riskier way to acquire property than buying through the usual process. That reality makes it vitally important to be well educated as to how real estate auctions work and prudent about the properties you consider bidding on.

To help you avoid making a big mistake, here are the basics of residential property auctions, so you can decide if this option might work for you—whether you want to live in the property or use it purely as an investment.

Tax liens or deeds can be purchased using one of the following methods:

  • Live On-site Auctions
  • Live Online Auctions
  • Over-the-Counter

How Homes End Up at an Auction

There are two common ways a home can end up being auctioned off.

Foreclosure auctions: When a homeowner has not paid the mortgage for at least a few months, they may fall into default and end up in foreclosure. When this happens, the bank files a notice of default with the county recorder. If the homeowner does not pay the balance owed—or renegotiate the mortgage with the lender—the lender can put the home up for auction and force the homeowner out for nonpayment. These foreclosure auctions are held by bank-hired trustees. 

Property Tax Default Auctions:

Another way a home ends up on the auction block is when the owner does not pay the assessed property taxes. In these cases it is the unpaid tax authority, rather than the bank, that seizes the property. The resulting tax lien auction is conducted by a local sheriff, clerk, or the county or local tax authority’s comptroller’s office.

Regardless of the auction type, these events may take place at physical locations such as local government courthouses and hotel conference rooms, and these in-person auctions are completed rapidly. Real estate auctions also increasingly take place online, where they may last for days or weeks.
Buying homes at auction has been and will continue to be popular.  However, foreclosure auctions don’t provide the discounts that existed during the time of the housing crisis. 

When fewer properties are available, buyers are highly motivated because of home appreciation and favorable mortgage rates. He says that online auctions have increased competition and driven up prices.

Property Condition and Inspections

A house could have all kinds of problems—remember, it used to belong to someone who couldn’t afford the mortgage or the property taxes, so the owner probably could not afford any routine maintenance or repairs, either.

Furthermore, once the loss of the home appeared inevitable, the owner may have intentionally neglected it or even seriously damaged it. Also, a vacant property may have been vandalized or occupied by squatters.
Assume that if the property looks terrible from the outside, it probably looks terrible on the inside. Auction properties are sold as is, and you will need to be able to afford any and all repairs.

1) Live, On-site Auctions

This is the oldest and most common method for selling tax liens and deeds. County officials schedule auctions unless the state requires otherwise. When you invest at a live auction you go to the county courthouse to bid on properties alongside other investors. Before attending, you register and get assigned a bidder identification number. Check with the county for any registration deadlines long before the auction.

You would sit down in the room and wait for the auction to start. An auctioneer stands at the front of the room and reads an identification (parcel) number for a property one at a time, which is usually the parcel number. Then the bidding begins on the property. The auctions are public so there may be quite a few people there, and the level of competition at the auction largely determines your success.

2) Live, Online Auctions

Online auctions work like a live, on-site auction, except it all happens on your computer. Before the auction starts, go to the website, register for the event, and download the updated list. When the auction starts, you simply bid by clicking your mouse.


The advantage of an online auction is you can participate from the comfort of your home. You can do most research from the comfort of your home and many online auctions will have the property information easily accessible. Just by clicking on the tax lien or deed that is being offered at the online auction, you can pull up much of the crucial information we are interested in.

Different Bidding Methods 

Methods Counties typically use one of three bidding methods at their auctions: premium bidding, bidding down the interest rate, bidding down the percentage of ownership, rotational bidding, and random selection.

Premium Bidding 

This method is most common for tax deed states. There are only a couple of tax lien states that use premium bidding. The premium bid method is like what you would expect at a typical auction. The price starts at the delinquent tax amount plus fees, it then goes up according to bidders. Depending on the competition at the auction, the price could remain fairly low or go fairly high.

The amount the property is bid above the base amount is known as the surplus. If the opening bid starts at $10,000 dollars and you end up paying $15,000 – the additional $5,000 is the surplus. Usually that will be given back to the property owner after debts are paid.

If investing at an auction using this method, make sure to set a maximum price you are willing to pay and do not exceed it.

Bidding Down the Interest Rate 

This system uses the interest rate the investor earns as the bidding medium. Bidding starts at the maximum rate of return the state offers and the rate is bid down by interested investors. Florida, Arizona, and other large tax lien states use this. In Florida, bidding starts at 18% and then goes to 17.75%, 17.5%, and on until no one is willing to go lower. If attending an auction that uses this method, set your base interest rate.

Bidding Down the Ownership 

This is the least common bidding method for good reason. This method uses the ownership of the property as the bidding medium. The bidding begins at 100% property ownership and then works down 1% at a time until bidding stops. After the sale, the investor would own whatever percentage he or she bid to, and the previous property owner retains the remaining percent.

If used in a tax lien state, the ownership applies after the redemption period ends and the investor attempts to take ownership of the property. In order to settle the difference, the investor would have to settle with the previous property owner. This bidding method is rare and a little bizarre.

Forms of Payment

Most counties will require payment for any tax liens or deeds 24 hours. Counties will require certified funds, bank checks, or cash. Online auctions have payment systems in place that allow you to pay with a credit card or ACH withdrawal.

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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