Around the two-year mark, a tax lien buyer files a Tax Deed Application (TDA) on any unredeemed tax liens within their portfolio. Included in the TDA can be title search costs, subsequent taxes, etc. After proper servicing, notice, and publication has been provided by the county, the tax collector then holds a second tax deed auction, selling the property to the highest bidder. As a result, a tax deed auction is a great way for a property investor to acquire properties for their portfolio. Earlier I mentioned the importance of your conduct at a tax sale, or for that matter, at any public auction. In the 20+ years I have attended live auctions, I have seen everything from fist fights, to elected county officials being indicted for and sentenced to jail for bid rigging. By innocently saying to a competing buyer at an auction, “Hey buddy, you take that one at 18% and I will get the next one at 18%,” you have violated antitrust laws, punishable by up to 10 years in prison. I have seen more than 20 tax buyers and elected officials go to jail for 18 months or longer for this punishable infraction. When you attend an auction, leave your emotions in the car. Experienced buyers are tasked with the job of making you second guess your bid or prevent you from bidding at all. Profes- sional, yet catty remarks are the norm at an auction. Bidders who fall prey to this game tend to get wrapped up in the moment, overspend, and never come back. Ignore the comments, be certain of yourself, and don’t exceed your set budget, no matter how much you may want to prove a point to the bidder pushing your nerves. •
ILLINOIS
TAX SALE: BID INCREMENT: MAXIMUM BID: REDEMPTION PERIOD:
Seasonal - Usually in the fall Bid down on maximum bid rate 18% (36% a year) Up to 3 years
Illinois is a great redemption investor state, but unfortunately, it is also a heavily sought-after state for institutional investors. Illinois is unique in that the amount buyers win the bid (at sale) “dou- bles” every six months. It is also a penalty state, which means if I buy a lien on a Tuesday for $1,000 at 18%, and the homeowner redeems it the following Wednesday, they owe me 18%, or $180. If it is six months and one day, that 18% becomes 36% and so on, for up to three years. With a long redemption period, money can be deployed for longer, which institutional buyers enjoy, and the likelihood of redemption becomes greater. Illinois also offers the first right of refusal to tax buyers to buy the subsequent tax lien for a set interest rate of 12%.
FLORIDA
TAX SALE: BID INCREMENT: MAXIMUM BID: REDEMPTION PERIOD:
Varies, but usually early spring/summer Bid down on maximum bid rate 18% (5% + 1.08% per month) 2-2.5 years
Florida is possibly the most unique and convoluted state in the country when it comes to tax sale auctions. Florida conducts both a tax lien sale and a tax deed sale. Lien sales are conducted online in nearly all Florida counties, which increases the number of bidders exponentially, and de- creases opportunity for private buyers. Bids are submitted to the lowest possible (1/4 of 1%) and winners distributed to randomly. Institutional investors flock to Florida because there is essen- tially no overhead to attend the auction and the 5% penalty they can achieve is adequate in their annualized yields, so long as they can count on an early redemption. The odds of acquiring REO are less than 3%, which also makes it attractive to institu- tional buyers.
Charles Sells is the president and found- er of Platinum Investment Properties (PIP) Group, which represents both large and small investors in hundreds of thou-
sands of tax lien property transactions each year. Learn more at pipgroup.com or email Charles Sells at charles@pipgroup.com.
thinkrealty . com | 77
Made with FlippingBook Online newsletter