Differences between NJ and AZ tax liens and auctions

[Dave Versch]

Hi all,

I've been doing NJ tax liens for some time, but have never ventured past my state boundaries in that respect.  Can anyone familiar with both NJ and AZ tax liens and their respective auction processes give me an idea of the key differences between the two?

Thanks,

Dave

[Jerry K.]

@Dave Versch  The process for the counties I invest in work this way;

• Same bidding method - you bid down the rate in full 1% increments from 16% down to 0%.  Lowest bid wins.  However there is no premium bidding.  You only pay the amount they list.
• If two or more people are tied with the lowest bid, the auction software randomly picks one of the tied bidders to win the lien.
• You pay a deposit of 10% of what you want to bid in total. So if you want to invest $10,000 in total, then you deposit $1,000 - usually a week or so before the bidding closes.  Sometimes the deposit is the same day as the bidding closes.
• You make the deposit via ACH - some will accept a check well before the deposit deadline.
• You can bid on more liens than you plan to invest.  In other words, if you want to invest $10K, then you bid on well over $10K in liens.  The software automatically cancels any bids that you would win if you don't have enough money to buy it.  So let's say you put a deposit to cover $10k and you won several liens and only have $1,200 of the $10k left. If you win the bidding on a $2,300 lien, your bid is cancelled since you don't have enough money.
• You have to pay the balance of what you owe for liens you win in 24 hours - again via ACH (some counties may accept wires). If you don't pay the balance in time, your liens are forfeited to the county and you are banned from future auctions.
• In AZ there is a 3 year redemption period.  In most counties (Not Maricopa though) the lien holder is offered the subsequent taxes first.  You have until Dec 31st the following year to pay the sub taxes.  You need to pay the sub taxes to keep your lien position.  If you don't pay the sub taxes, your original lien is grouped with the next year's of taxes and offered in the next auction as a multi-year lien.  The new investor pays you off  - so you get your principal and interest for a year and you are done with the lien.  The new investor now holds both years of liens and is that much closer to the 3 year redemption period since they hold 2 years of taxes.  Maricopa county works more like NJ where you can hold and keep an individual year of liens without buying the sub taxes.
• The sub taxes earn the same amount as your original lien.  Unlike NJ, you do not get the highest rate for sub taxes.  If you won the lien for 4%, your sub taxes only earn 4% too.

There are more nuances, but those are some of the basics.  I have several posts on my Biggerpockets blog about AZ liens and the auctions - including a post on what it takes to sign up for an auction - at the link below this post in my signature line.