Tax lien states - how do you bid?

[Will Sifert]

There is about 20 or so tax lien states and another 5 or so that offer both.

I’m fascinated at the different ways the bidding takes place. This is often something that is overlooked or missed when people talk about tax liens and how you bid can play a big part of the process. 

For example in Louisiana we bid down based on % of ownership. If only one person bids on the property they get it for 100%. If multiple people bid, they bid down however they like (90%, 50%, etc) till someone calls out 1%. Who ever says 1% first wins the property. If the property is redeemed the % is irrelevant. 

If your strategy is to make interest on your money and you do not want to acquire property, than you can bid 1% right away. Many hedge funds do this. From the interest they get to make an initial 5% and then 1% a month roi. (First year 17% return). If you bid 1% you want to make sure the property gets redeemed. If you pay the taxes for 3 years and it’s not redeemed you have no one to pay you back what you paid on taxes much less the interest. You can always try to confirm your tax sale and quiet title but you would only be a 1% owner. After legal costs and lawsuits to partition and sell the property (for 1%) it’s not worth it. 

If your strategy is to acquire property then you want to win the property with 100% or as close to that as possible. You are left bidding on properties that are more likely not to be redeemed, the ones not many people want including the hedge funds.  usually vacant land or a run down property. Thankfully some of the few in person tax sales left usually don’t bid down by %. The bidders all raise a number when a property is called out and they randomly call someone. If no one else then screams out a % bid, you get it for 100%. Online auctions, almost all the bids end up at 1%.

In Alabama, they bid down by % or interest you willing to make. It can go all the way down to 0% and everyone who bid 0% goes into a random drawing. If the property is redeemed you just get your money back, you make 0% interest. If you are able to acquire the property you have 100% ownership. Better for people who want to acquire property, you just have to get lucky. 

Wyoming, I believe most if not all are in person. You are given a number. When each property comes up they randomly pull a number. If your number is called you can say yes or no if you want that piece. If you say no they pull another number and so on. The percentage you make from interest and the percentage of ownership you obtain (if not redeemed) is not used in the bidding process. 

Colorado, you pay a premium. This process seems to resemble closer to gambling than investing to me. It is interesting none the less. Each property starts with the amount owed in back taxes. You bid that number up. Who ever bid the highest amount wins. However, if the property is redeemed you only get back the starting amount (taxes owed) and you only make interest on the taxes that were owed. You never get back nor make interest on the additional amount you spent. 

What is the bidding procedure in other tax lien states ?