Louisiana online tax sale auctions - educate yourself before bid

[Will Sifert]

PLEASE educate yourself before you bid....

So, my home parish moved to online tax sale auction last year because of covid, and kept it that way this year (likely will stay that way from here on out). So no more in person bidding.  Now, people from all of the world can easily bid on Louisiana property tax sales and have no clue what they are doing.  The bidding in my state is different than most, you bid down the percentage of ownership you would take in the property, assuming it wasn't redeemed and you went through the process to take legal ownership (suit to quiet title).

I'm guessing some people have no idea what bidding 1% means, and they were just happy to win the auction.  (First one to bid 1% wins).

The hedge funds from Nebraska love bidding in my state. You make 5% initial interest plus 1% per month - 3 year redemption period. So if someone waits till the last minute to do a redemption, you made 41% return on your 3 year investment. Most properties are redeemed after a year or two, but just a 12 month return, you make 17% interest. Pretty good.  So they will bid 1% right away on all properties that they feel confident will be redeemed. In most cases 98% of the properties will be redeemed. Especially if it is a house someone is living in (not abandoned or blighted) and just about every tax sale property for 2K-3K or more tax bill will be redeemed 99.9% of the time.

So if your investment strategy is to make a high rate of interest, you do like the hedge funds and bidding 1% isn't much of a risk. What does it matter if you bid 1% ownership of the property if it is always redeemed.

The other investment strategy is to try to acquire the property. If this is your goal DO NOT BID 1%.  You pay taxes on the property for 4+ years, pay a lot of legal fees for an attorney to do the suit to quiet title so you can take 1% ownership?!?!?  NO.....

If you want to acquire the property than 100% is ideal, but if not 100% you want own as much of the property as possible. If the property doesn't get redeemed and you own 90%, you do the suit to quiet title and a partition where the property is sold and the proceeds are split up between you and the original owner based on the percentage you bid and won at the tax sale. If the property is sold for 30K and you bid 90% you get 27K and the original owner keeps 3K.  If you bid 1% and the property is worth 30K you end up with $300!!! 

I typically bid on the properties that have the highest chances of not being redeemed, in most cases these properties are worth 10K-50K. I saw way too many people bidding 1% on properties that are only worth $10,000 - $30,000.  It makes no sense. They obviously have no idea how it works. They are throwing their money away and in the process preventing other people like myself from having a shot at them. 

/Rant

If anyone doesn't understand how the Louisiana property tax sales (online auctions) work and plans on bidding on them please ask questions, I would be more than happy to help educate you.