Tax Lien Sale-high bid premium

[Richard W.]

Can someone comment on why municipalities charge a high bid premium on winning tax lien bids, and what happens to these funds since they don't incur interest. For example, I see a MD county charging a 20% premium on any bids that are higher than 40% of the cash or assessed value of a property. So am I correct in assuming a $42k winning bid on a property worth $100k would incur a $400 high bid premium.

$100k x .40= $40k, thus $2k x .20= $400 for a total purchase of $42,400 , of which the $400 is not interest bearing.

Is this a financial incentive for mortgage holders on a property to take FC action quickly?

Please correct me if Im not grasping the math.