Texas Tax Sales – Answers to Your Questions

Have questions about Taxes Tax Sales? Here’s the answer to a couple of questions about Texas tax sales that I got a few years ago. These are questions that I frequently get and the answers to these questions are still relevant today…

Questions:

I am going to my first auction in Texas.

  1. If I win a bid, when can I move into the house?
  2. What other liens- IRS, creditors have priority over tax liens?
  3. How do I find out if any of these liens are in place?

Answer to Texas Tax Sale Question #1:

At Texas tax sales, the winning bidder purchases a redeemable deed and is considered the owner of the property once the deed is recorded. The previous owner has a right of redemption which can be either 6 months or 2 years, depending on whether the property is homesteaded or not. The redemption period starts once the deed is recorded, so you’ll want to record it right away. You may have to evict whoever is living in the house before you can move in. Also you have to keep in mind that the previous owner can redeem at any time during the redemption period.

Answer to Texas Tax Sale Question #2:

IRS liens do survive a tax sale and you should read the rules of the sale carefully to find out what other liens my survive. If the rules of the sale are not published or do not specify which liens survive the tax sale, you can look at the state statutes for tax sales or ask the county treasurer or the attorney. Many of the tax sales in Texas are handled by a law office.

Answer to Texas Tax Sale Question #3:

You can find out about liens and judgments on tax sale properties by searching the public records. Many counties in Texas do provide a free online public records website where you can search for liens. The IRS has 120 days to redeem a property that has been sold at a tax sale, so they could come and redeem the property up to 4 months after you purchase it at the tax sale. If they do you will get your investment back plus 6%. The IRS would probably not want to spend a large amount of money to redeem a property for if they only have a small lien against it. But you might want to avoid bidding on deeds that have large IRS liens or judgments against them.

 

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Making Tax Deed Sales in Texas Easier!

Tax Lien Lady and the Tax Deed Dude

Our next Wealth Building Webinar “Making Tax Deed Sales in Texas Easier,” with my good friend Arnie Abramson, fondly known as the Tax Deed Dude, is coming up this Wednesday, February 12!

Arnie is a tax deed investing agent in Texas. Although he has invested in tax liens in some other states, he is THE EXPERT on tax deed sales in Texas. His company, Texas Tax Sale Resources, has been around for a long time.

He has been a guest at my live conferences that I’ve done in the past and we’ve done a few webinars together. Each time he brings to the table the latest tax sale news from his home state, Texas. His company keeps changing to keep up with the times and I think you’ll be surprised at what they’re doing now!

Tune in to our webinar Wednesday night at 8:30 pm Eastern time/ 7:30 Central to find out the latest tax sale news for the most profitable redeemable deed state! You can register and come to the live training at no cost HERE.

Here’s what you’ll learn on our next “Texas Tax Sales Made Easier” Wealth Building Webinar…

  • What Makes Texas Tax Deed Sales Special
  • How the Texas Tax Sale Process Works
  • How to Make it Easier
  • What are the Challenges and How to Overcome Them
  • Ways You Can Participate

Wealth Building Webinars

The Webinar is free for all to attend live, but the recording will only be made available to members of the Wealth Building Webinar series. You can find out more about Wealth Building Webinars at http://WealthBuildingWebinars.com.

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Get Ready for the Arizona Online Tax Sales!

Arizona online tax lien salesIf you’ve been wanting to invest in tax liens, right now is the time to start, because registration and bidding for the Arizona online tax sales start in January. But don’t bid at these tax sale auctions until you get some education…

Why? Because you can lose money with Arizona tax liens if you don’t know what you’re doing! That’s right! You can lose money in the Arizona tax sales if you don’t do it right, and that’s where I can help! Continue reading

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Bidding at the Tax Sale – the Good, the Bad, and the Ugly

Bidding at the Tax SaleTax deed sales and redeemable deed sales are straightforward and bidding at the tax sale is easy to understand. You bid up the price of the property at the sale. Then you pay the amount you bid, plus any additional costs. Costs such as any auctioneer’s premium, realty transfer fees, and recording fees.

Bidding at the tax sale is not so simple for tax liens. There are different methods of bidding depending on the state and sometimes even the county or city where the tax sale is held.

The most common bidding procedures are:

  • Bidding down the interest rate
  • Premium bid – bidding up the price of the lien
  • Bidding down the percent ownership of the property should the lien not redeem, and the investor get the property
  • Round robin or random selection method of bidding, which is not really “bidding” at all.

Other Procedures For Bidding at the Tax Sale

Besides the 4 methods mentioned, there can also be a combination of any of them. In New Jersey for instance the interest rate can be bid down to 0% and then premium is bid. Some Colorado counties will use the premium bid method for the larger liens and random selection or round robin for the smaller ones. Some counties in states that allow for bidding down the percent ownership of the property will use a round robin or random selection process instead.

Which Bidding Procedure is Best?

All of these bidding methods have their pros and cons. Oddly enough it’s the bidding procedures that seem most attractive that have the biggest drawbacks. For instance, when you bid down the percent ownership of the property you get the the maximum rate allowed, since it is not bid down at the sale. But if you get the property, unless you won the bid at 100%, you share ownership, and do not have sole rights to the property.

Round robin or random selection bidding sounds great for the same reason, you get the maximum interest rate. But you do not know which liens will be offered to you, and sometimes you don’t have the right of refusal. So, neither bidding down the percent ownership or round robin or random selection are the best bidding procedures for the investor.

We all know that in the states that bid down the interest rate, the interest rate gets bid down extremely low, sometimes down to 0%. And it seems that the states that have the highest statutory rates is where these rates get bid the lowest – 0.25% in Florida, 0% in New Jersey and Illinois, 1-2% in Arizona. So where can an investor go to get tax liens at higher interest rates?

What Does it Mean To Bid Premium for Tax Liens?

Bidding premium for a tax lien means bidding an amount over and above the lien to get the lien. The winning bidder is the investor who bids the highest amount for the lien. Sometimes this is bid as a separate amount from the lien, and sometimes the amount of the lien is included in the bid amount. Some states give you interest on your premium if the lien is redeemed and some do not. In the state of Colorado, you do not get your premium back when the lien redeems.

How Does Premium Bidding Work?

Premium bidding works differently in different states, and even in different counties or cities in the same state. I’ve been in this business for more than 20 years and I’m still finding out about bidding procedures in different taxing districts. That’s because in some states each city can have their own tax sale and make up their own rules! For instance, the counties in New York, except for Nassau County, sell tax deeds. But the cities in each county can do what they want and have their own tax sales. They can sell liens or deeds according to their own city code.

I have been to tax sales in 2 of these cities, in the same county. Both had tax lien sales, both were live auctions, and both used the premium method of bidding. But they each have a different way of handling the premium. And they each have different tax sale rules and procedures.

Tale of 2 Cities

In one city tax sale premium is bid in addition to the certificate amount. In other words, premium is a separate amount bid that must be paid in addition to the amount of the tax lien certificate. The successful bidder pays the bid amount bid plus the lien amount. The redemption period is 2 years, and the interest rate is 12% per annum calculated at 1% per month. The bidder receives that rate on the entire bid amount, and all subsequent taxes that are paid.

In another city in this same county, premium is also bid at the sale. But the amount bid at this sale includes the lien amount. The successful bidder does not pay the premium or overbid at the tax sale. The amount of the bid over and above the lien amount is only paid if the lien does not redeem. The redemption period is only one year and the interest rate is 15% per annum, calculated daily.

Which is the better 

These are 2 cities in the same county; one that has a tax deed sale – not a tax lien sale. And each of these cities are entirely different in how they conduct their tax sales. It seems that the sale where you don’t have to pay the premium unless the lien doesn’t redeem, and you get the property is a better sale to bid at. But because full amount bid is not paid at the sale, bids can go very high at this auction.

I’ve seen amounts higher than 70% of the property value bid at this auction. If the lien doesn’t redeem, then the entire bid price must be paid. And any subsequent taxes due, title search fees, notification costs, and recording fees must be paid to get the deed. And that is before, evicting occupants, rehabbing the property, and clearing the title so that it can be sold.

The Bidding Procedure I Like Best

So which procedure do I like best for bidding at the tax sale? I prefer to bid premium in auctions where I have to pay the premium and get interest on the full amount that I bid. This is the method used at redeemable deed sales, as well as a couple of the tax lien states. I also like to have the ability to pay the subsequent taxes and have them added to my lien.

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Where’s The Real Money in Tax Lien Investing?

the real money in tax lien investing

So many investors, when they decide to start investing in tax liens, want to know which states pay the highest interest rate or penalty and have the shortest redemption periods. They assume that those are the best to invest in, and that’s where the real money in tax lien investing is.

But so does everybody else, including banks and hedge funds. That makes these sales very competitive. Either the amount of the lien or deed is bid up so high, or the interest rate is bid down so low, that any profit is minimized. Investors and hedge funds are now fighting for the opportunity to buy liens and redeemable deeds for very low return on investment!

Hence some tax lien investing “experts” have recommended that investors don’t bid at the tax sales among all this competition, but instead purchase the left-over liens. But in doing so they fail to mention 2 very big drawbacks to this strategy. First not all counties sell the left-over liens or deeds that are not sold at the tax sale. Some will just rebid them year after year. Secondly, there is a reason why liens don’t sell at very competitive tax sales, and that reason is they are liens on junk properties. Although every once in a while you can find a decent property among the left-overs, it is a very time consuming process that has to be accomplished in a specific time frame. It is not something that I recommend for new investors.

Can you still make good money with tax liens?

So how does a person make good money or get double digit returns from tax lien investing? Rest assured that it is possible, and can be done. The way to do it depends on how much money you have to invest. For individual investors with smaller amounts of money to invest, I recommend these 5 things… Continue reading

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