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What is an Over-the-Counter IRA

What is an Over-the-Counter IRA

Over-the-counter investing refers to when an investor makes a purchase relating to the tax sale. This happens after the auction has already taken place. Investors buy tax liens and deeds that were not purchased at the auction. There are advantages and disadvantages.

An individual retirement account (IRA) is a perfect way to supplement a work-based retirement vehicle. Individual taxpayers can open either a traditional individual retirement account (IRA) or a Roth IRA. For 2020 and 2021, annual contributions to either type of account max out at $6,000 per year, $7,000 for those 50 or older.

Only the traditional IRA allows a tax deduction when it's opened. It also has no income restrictions limiting who can open one, though the ability to deduct contributions can be limited for those with a retirement plan at work (or a spouse who has one).

  • An IRA is an investment vehicle that earns money tax-free until funds are withdrawn.
  • The IRS allows taxpayers to deduct the amount of their traditional IRA contributions from their taxes.
  • An IRA can hold equities, bonds, real estate, and other investments.

Finding further information on the traditional IRA isn’t difficult, but a few important factors aren’t overly apparent. Here are five.

1. There Are Limits on Investments

An IRA is a type of investment vehicle that earns money tax-free until funds are withdrawn and is not an actual investment. For example, the custodian—the financial company that offers and oversees the traditional IRA—will also offer a choice of investments varying in return and risk, such as Treasury bills, money market funds, mutual funds, stocks, and bonds.

You can't invest in just anything, however. Certain types of investments are prohibited from being in IRAs, such as life insurance and antiques or collectibles.

2. The Beneficiary Form Needs to Be Kept Updated

The beneficiary form tells the custodian what to do with the funds should the account holder die. Without the form, loved ones run the risk of not receiving the money quickly or in full. This form also needs to be kept updated, especially if the account holder goes through a divorce or other major life changes.

3. There Are Mandatory Withdrawals

Not all retirees need to rely on an IRA for living expenses. Unfortunately, because the IRS imposes required minimum distributions (RMDs), account holders must begin withdrawing money from their traditional IRA generally by April 1 of the year following the year in which they turn age 72 (or 70½ for individuals who reached that age during 2019 or in a prior year). Failing to do so results in hefty tax penalties—50% for every dollar not withdrawn. This is one area where Roth IRAs are a better alternative—they have no RMDs until the account holder dies.

4. No Borrowing is Allowed

Some retirement plans allow short-term loans, but the traditional IRA isn’t one of them. Borrowing from a traditional IRA incurs taxes at the account holder's income tax rate, possibly on the entire value of the IRA, if the account is pledged as collateral. According to the IRS, “If the owner of an IRA borrows from the IRA, the IRA is no longer an IRA, and the value of the entire IRA is included in the owner's income.”

One option is to withdraw money from an IRA and roll it over into either the same or a new IRA within 60 days. This is not considered a loan; rather, it is a distribution and rollover. This option can be done only once a year, and care is needed with deadlines.

5. Real Estate Is a Valid Holding

An IRA doesn’t have to hold only equities, bonds, and other Wall Street-type investments. The account can hold real estate, too. The catch is that the real estate has to be a business property; the account holder can’t purchase a second home or pay off a current home. A house can be bought and flipped as an investment property.

The IRS has strict rules regarding real estate in an IRA. Because of the higher dollar value and the less liquid-nature of real estate, this option is only for the more sophisticated investor and requires having a self-directed IRA (SDIRA), a type that allows you to have a wider range of investments. Talk to the appropriate experts before considering adding real estate or opening an SDIRA.


  • Maximum Rate
  • Comfort of Home
  • Avoid the Auction
  • Foreclosure Opportunities

Advantage: The investor receives the full interest rate when buying over the counter. When an investor purchases during the auction, other investors can purchase the same tax lien. The most common bidding method used by tax lien counties to determine the winner, is to bid down the rate of return until no one will bid lower. Investors essentially bid away their return based on the level of competition on that certificate.

When purchasing after the auction, the investor is not bidding against other investors, but simply picking the tax liens wanted and sending secured funds to the county to make the purchase. The county sends a receipt back to the investor, which shows the full interest rate – which is not reduced in any way – for that state.

Advantage: Investors can invest from the comfort of their home. As an over-the-counter investor you do not attend the auction, so there is no reason to leave your home. This process is simple: You acquire the over-the-counter list (can be done online), research the list to find investments you like, send in certified funds to the county along with a description of the tax certificate you want to purchase, and wait for your receipt from the county. At this point, you can sit and watch The Price is Right, until the county sends you a check with your initial investment plus interest.

Advantage: Avoid the hustle and bustle of the auction. Some investors really like the competition and excitement, or they want to be able to buy all available tax liens. Most people prefer to avoid the auction altogether. As mentioned earlier, over-the-counter investors do not need to attend the auction. Instead, they can make all investments from the comfort of home or from anywhere with Internet connection.

Advantage: Foreclosure opportunities on over-the-counter tax liens can be greater. The redemption period usually starts at the time that the tax lien is offered at the auction, whether the certificate is sold at the auction or not. Investors can time the purchase of the tax lien, so they buy after the redemption period ends or right before it ends and begin the foreclosure process right away. If you are interested in foreclosing on tax lien property, then buying over-the-counter toward the end of the redemption period may be a great solution.

  • Leftover Opportunities
  • Accessibility
  • Not Always Available

Disadvantage: Investment quality on over-the-counter lists. Investors that attend auctions have a shot at every tax lien certificate listed. If they were diligent, they would have fought hard to get properties most people consider desirable. For example: Single-family residential homes with significant values. Chances are the investors that attended the auction picked up properties you would get excited about. Did they buy all of them? Probably not, but it is less common finding an awesome single-family residential home when over-the-counter.

You will typically find vacant land, improved lots, commercial properties, and single-family residential homes with lower values when looking at over-the-counter lists. That is not always the case but tends to be the norm. Nevertheless, those options can all be fantastic investments.

Disadvantage: List accessibility. More and more counties are putting over-the-counter lists on their website, usually listed as County Held Certificates, or something of that nature. Some smaller, or slow counties will not post the list online, so the investor would have to seek out the list by contacting the county directly and making a request. In some cases, counties may charge a small package fee and send the physical list to the investor, depending on the size of the investor. Though, in many cases the county will describe how to acquire the list through the county website.

The final disadvantage is that some counties do not offer over-the-counter investments. This is more common for tax deeds than tax lien certificates. In that case, the county holds onto the investment until the next auction date, and then the county offers leftover investments back to investors. Most of the more popular counties and states will offer over-the-counter investments such as Arizona, Florida, and Illinois.

An interesting thing to consider is the secondary market. As you attend auction you will notice institutional investors that buy large numbers of tax liens. They will spend millions at some of these auctions. It has become more popular to buy directly from these institutional investors. Let us know if you are interested in this since we can help you. There is potential for you to get even better deals from them than you would from the county.


Investing over the counter is simple and also similar to preparing to invest at the auction.

  • Select a State/County
  • Find the List
  • Quickly Narrow the List
  • Perform Due Diligence
  • Pick and Invest

Since we have gone over these steps before, we will not do that here. We will go over the Pick and Invest step because it is different than purchasing at the auction, as was shared before.

After going through the list and finding investments meeting your criteria, you would reach out to the county. You can find the contact information by searching google, or by tracking down the information from You would first make sure that the investment is still available since there may be other investors going through the list. Once you confirm availability, you should find out the amount you need to pay on that date since some interest may have built up since the over-the-counter list was issued. Then you should ask if there is anything else you must do before making the investment. They will probably need to issue a bidder number after you fill out some quick forms so they can keep you on file as an investor of their county.

The last thing you need to do is send certified funds to the county and wait for your certificate or receipt. Once you have your receipt, all you need to do is wait for you check in the mail or the redemption period to end, so that you can foreclose on the property.

There, a brief overview of over-the-counter tax lien investing. Please let us know if you have any questions.

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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