The Dangers of Leftover Tax Liens

Leftovers are NOT good for you! Leftover tax liens, that is, or OTC (over the counter) liens as they are commonly referred to. Here’s why…

I get a lot of questions about leftover tax liens and deeds. These are the liens and deeds that don’t sell at the tax sale. They are the left-overs. There are a few tax lien investing “experts” that have people thinking that leftover tax liens are the way to go. They seem to think that because there is a lot of competition at tax sales, and you can’t always get double digit interest rates when bidding at tax lien sales or  get real estate for a fraction of it’s value at a tax deed auction, that it’s better to buy the leftovers or OTC liens directly from the county. Their rationale is that there are so many liens and deeds that are not sold at the sale and made available to purchase directly from the county. These are usually available for purchase without any competitive bidding. The problem is they fail to tell you 2 things. The first is that leave out the part about why these liens or deeds do not sell in the first place and the second is that not all counties have over the counter liens or deeds.

Why I don’t invest in OTC liens or deeds

dangers-of-left-over-tax-liensI am constantly being asked about leftover or OTC liens. People want to know where they can get them. That’s because not all counties sell leftover tax liens or deeds. Some counties will just keep offering them at auction until they sell. But even for the counties that do make over the counter liens or deeds available, it is not strategy that I personal use or recommend to my students.

Some people will claim that there are so many liens or deeds left-over, all you have to do is go to the county and purchase them direct. And then you can get liens without bidding down the interest, or deeds without bidding up the cost of the deed. But even for the counties that sell leftover liens or deeds, this is not a good strategy. Think about it. If the tax sales are so competitive that some gurus are advising people not to bid at the tax sale, what makes you think there is anything good left over. The truth is that almost all of the left-overs are junk properties.

So many times someone comes to me after they have followed someone else’s advice and purchased left-over liens, and they have lost money on their investment. They bought liens on junk properties and now want to sell them, but nobody is buying. Nobody is buying and the liens have not redeemed. So now they need to make a choice, foreclose on worthless property, that they won’t be able to sell or cut their losses. If they only had come to me first, before they bought the liens, I could have prevented them from losing money.

There is a way to invest in OTC liens profitably but it is time consuming and not conducive to the way that most people want to invest. Every once in a while a good property does slip through the cracks, but when that happens it gets grabbed up right away. Investors are waiting for that opportunity. It’s like looking for a needle in a haystack and when you do find it, you have to be ready to pounce and be first in line to purchase that lien or deed. This is not a strategy for new investors, and as I mentioned earlier it is not one that I personally use. I have other strategies that I use to avoid the competition at tax sales and make more money on tax liens. And I share these strategies in my Advanced Tax Lien Investing Secrets (ATLIS) Training. I also still attend live and online tax sales. That is still my preferred way of getting profitable tax liens.

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