If you’re headed to Tax Sales in New Jersey this fall, beware of the accelerated tax sales.

What’s An Accelerated Tax Sale?

When you attend a tax sale in New Jersey, most of the time the municipality is selling delinquent taxes from the previous year, so if you went to a sale now you would be buying last years taxes. But at an accelerated tax sale the municipality is selling this years delinquent taxes.

Of What Importance Is That To You – The Investor?

Investors pay premium for tax liens in New Jersey (after bidding down the interest to 0%) for 2 reasons. Firstly, there is a penalty they will receive on lien amounts over $200 (2-4% depending on the amount of the lien). And secondly, once they have a lien, they can pay the subsequent taxes and get the maximum interest rate on the subsequent taxes paid.

What Are Subsequent Taxes?

When you purchase a tax lien, you are usually buying previous years taxes but there could be current taxes due. Current and future taxes are what is meant by “subsequent taxes,” they are taxes that are subsequent to the tax lien amount. The investor gets to pay these taxes if the owner doesn’t pay them on time. And in New Jersey the investor earns the maximum or default rate of interest on these subsequent tax payments.

What Does This Have To Do With An Accelerated Tax Sale?

In an accelerated tax sale, the current year taxes are being sold, not the previous year taxes, so there are no subsequent tax payments that the investor can pay after the tax sale. The investor will not be able to pay any subsequent tax bills until the property owner is delinquent in paying them. This will effect how much premium you can pay for a tax lien and still make a decent profit.

How Do You Know If A Tax Sale Is An Accelerated Tax Sale?

Usually in the notice of tax sale the tax collector states the delinquent tax year of the properties being sold. If in doubt, you can always ask the tax collector which delinquent taxes are being sold – the current year or the previous year. Municipalities operate either on a calendar or fiscal year so most of the accelerated tax sales happen in June – the last month of the fiscal year, or December – the last month of the calendar year. So in those months you should take extra care to check if the tax sale is an accelerated sale before you decide how much to bid on properties. It could very well effect your bottom line.

Need Help In Determining How Much To Bid? 

If you need help in determining how much to bid on properties in New Jersey, there is a customised software program that help you do this. It also contains the contact information for all of the NJ municipal tax collectors and county clerks, and tracks your liens, your profit, and automates the whole business of tax lien investing in New Jersey. The name of the software is Tax Lien Manager™ and I’ve been using it to manage New Jersey tax lien portfolio for the past 7 years. There are also customized versions of Tax Lien Manager™ for Arizona, Florida, Indiana, Nassau County NY, and South Carolina. Find out more about Tax Lien Manager at www.TaxLienLady.com/TLM.