Just Went to NJ Tax Lien Sale.. Not Worth It?

[Mike Kalob]

So I went to my first ever NJ Tax Lien Sale couple of weeks back...

ALL of the properties sold at pretty insane premiums.. please see below - tax lien amount on left, premium bid on right..

Tax Lien..............Winning Premium Bid
$2,818.55............$14,600
$14,224.22...........$28,110
$5,382.15............$15,200
$3,221.28............$17,200

etc....etc...etc (These homes were in the $200k-350k range)

What gives?

There were about 5-6 "pros" doing all the bidding while the rest watched..

As pros, I assume they already know that 97% of taxes are paid back, and it's very RARE for an actual foreclosure to take place, so I know they're not trying to bid on the property in hopes of getting the actual home..

That said one can assume, they're trying to earn interest, by paying a huge premium?

I understand a small premium, since one can avail of NJ's 4-6% penalty, and subsequent taxes receive the higher rate...

But since the premiums are well above annual tax rates, and there is a small 2 year waiting period for foreclosing, PLUS it's most likely the mortgage company or home owner will pay off the taxes (so no home gained), I don't see the reasoning for paying such high premiums, given that any "gain" on subsequent taxes would have to fall OUTSIDE the 2 year waiting period due to the high premium amount, but homeowner or mortgage company would most likely have paid off by then.

PS this was in a more "rural" area of NJ, as I avoided the congested counties since I heard it was even worse there (in terms of higher winning premiums).