Collusion can get you jail time and huge fines….. Don’t Do It!

It seems innocent enough, you go to a tax sale and notice that there is a discussion among the bidders before the tax sale about which properties they are going to bid on. The tax sale starts and the interest rate is not bid down on many of the properties. Most liens are won at the maximum interest rate. This might seem good to you, after all you’ve been told that you can get the maximum rate on tax liens, but it’s illegal. Collusion at a tax sale in most states is a felony and can result in jail time along with hefty penalties.

In the last couple of years there have been ongoing investigations in the states of Maryland and New Jersey, with a few tax lien investors being indited for collusion at tax sales. Because of this, it is getting more difficult to get tax liens at those high rates of return. Some of the institutional buyers are now bidding down everything, just so they won’t be accused of collusion.

Another thing that is getting tougher for tax lien investors in NJ is getting liens at the maximum rate if you are the prior lien holder. Some tax collectors consider it collusion just to announce that you are the prior lien holder when bidding and won’t allow it. Continue reading →