Florida is the state with the most online tax lien sales. Now that they’re over it’s a good time to take a look at the results and how some of you fared in the Florida tax sales. I always get a few e-mails from new investors that try to participate in the Florida online tax sales. Invariably, they make the mistake of bidding too high on the wrong properties and don’t get anything.
It’s true that there is a lot of competition at these sales and many of the properties are bid down to .25% – but the institutional buyers wouldn’t be doing that if it wasn’t profitable for them. There is a minimum penalty in Florida of 5% – and that’s a penalty not an interest rate. So it doesn’t matter if the lien redeems in 2 years, 2 months, or 2 weeks you get a straight 5% on your money. So institutional buyers will bid down to .25% on pretty homes that they think will redeem right away. But if you look at the results from these sales, you’ll see that these same bidders averaged much higher than .25% on their winnings. That’s because they also bid on other properties that they did not expect to redeem so soon – other properties besides residential homes, and then bid much higher rates on those properties.
If you want to be a successful bidder you have to bid on properties that are not what everybody else wants, and you have to bid on lots of them, not just a few. If you’re only bidding .25% on pretty houses, then you may have to bid on close to 200 in order to get one or 2. But if you bid on land (that you did your due diligence on and you know is good), you can get close to 18%. And if you want to make sure that you’ll get paid on your lien, bid on land that has a mortgage on it.
Here’s how smart reader was able to have good success one of the Florida tax sales after learning from his experience at his first tax sale:
“I placed ~30 bids for around 15% in the Nassau County auction and won nothing… After reviewing the results I got an idea of what %’s the parcels go for. So I re-adjusted my strategy for a different auction in another county in Florida the following week. This time I placed 40 bids. I won 10 certificates [worth ~$200 mostly, or less each]. 9 are for vacant lots at 6% (in retrospect I think I could have gotten them for 8-9% looking at the results) and one was a homesteaded property for 0.25%. I bid on a bunch of homesteaded properties to test it out to see how thick the competition is, and I found out it is SUPER competitive.”
In the last member training that I did for TaxLienLady Members, we went over the results three different Florida tax sales. One at the beginning of the tax lien sale season, one in the middle of the season, when all of the sales were going on, and one at the end of the season when most of the tax sales were over. We went over what was actually going on at these sales and how to have successful bidding strategies for future tax sales. The replay of the webinar training is posted in the members area. If you’d like to find out more about joining Tax Lien Lady’s Members Area, go to http://TaxLienLady.com/MembershipMain.htm.
By Dean June 20, 2012 - 2:32 pm
Laurie: I Bid on 1153 properties for a total bid amount of $2,310,102 and won 133 certificates. I only one two out of my hundreds of 0.25% bids. Contact your county tax collector, as well as your State Reperasentatives. Maybe if they hear from enough of us, the push to level the playing field will move up on their priority lists. Eliminating the allowance of sub-accounts in Florida did not work. The institutional buyers found a way around it.
By Laurie June 20, 2012 - 1:23 pm
I participated in the Okaloosa county tax sale. I bid on 138 properties for a total bid amount of $ 387,000 and bid .25% for each lien. This resulted with zero winning bids.
It was so disappointing. After the sale results were posted I noticed that some institutional buyer had up to 32 tax ID numbers. This is an uneven playing field. I considered opening accounts with the SS# of all my family members just to have a chance at 4 more bid numbers.
By Dean June 20, 2012 - 11:11 am
I participated in my first Florida auction this year. I purchased 133 certificates.
The following is part of an email I sent to my county tax collector: “Overall, I was happy with my first certificate auction experience. I was successful in obtaining the investment amount I desired, but I was a little disappointed in the certificate mix I won. Based on results of the auction, it is obvious that the playing field is not level for the small individual investor compared to the large institutional buyers. The prime Single Family properties that get bid down to the 0.25% level where the tie bids are randomly selected by the computer is where the large institutional buyers are able to stack the odds significantly in their favor by obtaining multiple bid numbers to stuff the auction box with. I believe an effort was made, for the first time this year, when many counties (Santa Rosa included) did not allow the use of sub-accounts for their tax certificate auctions. However, with just a quick look at the attached results showing the winners of the Santa Rosa properties bid down to the 0.25% tie level, it is obvious that the large institutional buyers found a way around the no sub-accounts rule to circumvent the rule of fairness.”
Here is his response: “The Florida Tax Collectors are going to meet to discuss ways to improve the online tax sale auctions. We thought we were making a step in the right direction but the big institutional investors found a way to get around the subaccount situation. We will continue to look at ways to make the auction an even playing field. Thanks for taking time to contact me and express your concerns and experience with the recent auction.”
I also emailed my State Reperasentatives on this.
By Stefan June 20, 2012 - 8:34 am
Greg,
It depends on the county and if they have proxy bidding. In some of the Florida counties, proxy bidding allows you to put in your lowest acceptable rate and the system will automatically bid you down by 0.25% below the next lowest bid until you reach your the % you entered. Other Florida counties enter your bid at the exact amount you entered. If you bid 5% and the next lowest bid is 10%, you win at 5%, not 9.75%.
Stefan
By Greg June 20, 2012 - 6:42 am
Its great to hear of members or individuals succeeding at tax lien sales particularly in Florida.
However, one comment that needs setting straight is the clients comment that they could have gotten a property for 8-9% instead of the 6%. Regardless of what the bidder sets as the interest rate, they will win the lien at 0.25% below the last remaining bid. Eg if my bid on a lien is 2%, and there was only 1 other bidder who bid 16%, then I would win the lien with a bid of 15.75%, or 0.25% below the other bidder.
So your member has done well to change strategy and learn from an earlier auction.
Greg