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The process of tax lien auctions varies from state to state. They all fall into one of the following categories:

Lien state
Deed state
Hybrid state

When a person fails to pay thier property tax the county puts a lien on that property for the tax due plus and associated fees. The owner of the property has a set amount of time to pay the overdue taxes. If the owner fails to pay the taxes within the alotted time then the county will sell the lien at public auction.

In a lien state you are purchasing the lien only from the county. The lein is worth the amount of taxes due by the owner. The owner then has a set period to pay you back for the lein. On top of the initial amount of the taxes the past due property owner would also have to pay you a percentage. Depending upon the state you are in the percentage will be different. If the property owner doesn't pay the lein holder (you) back within the given time then the physical property goes up for aution. You may attend the auction and bid on the proprty but you do not have any priority over other bidders. When whoever wins the auction pays the county your are reinburced for your lien.

In a deed state you are auctually bidding on the deed for the property. The only state I am aware of that is a full deed state is New Mexico. The high bidder of the auction it awarded a deed by the county. At this time the only lein extinguished by the auction is the tax lein. If there were any pre-existing leins on the property (mortgage, home loan, etc.) then those will still exist. So in this type of auction you will need to do significant research.

A hybrid state you purchase the deed, but the owner has a redemtion period to pay back the lien plus interest. This typically results in quicker payment of the lien.

There are also variations of bidding structure from state to state. Some states you are bidding on the actual price you will paythem for the lein, in other states you are bidding on the percent return you are getting on the lien. In the case of bidding on the percent you are starting out at the maximum percent they will give and "Bidding Down" the percent. This is where the premium comes in. For instance say a properties premium is
$3000 and the percent you are bidding starts at 30% you would comete with the other bidders by decreasing your percent. Once the lowest percent has won the winner will then pay the premium and will be issued a lein worth the premium + the % of the premium.

You should always check with your local government for the most accurate information concerning lien auction. You can typically find the county tax assessor's website online. That would be a good place to start looking.

There are also books written specifically on the subject that are of great help in understanding the process.

Tax lien investing can be a safe way to invest with real estate however, as with other real estate investing methods it is not something that will bring a large return of money very quickly. Also do not expect to pick up a $500,000 home for $1000, there will be many other people at the auction and will drive the prices up.

So it sounds like buying a course/book isn't neccesary.

I'm looking into this because I am going to be attending a tax sale next month here in NM. As some of you may know in NM a tax sale does NOT extinguish any previous leins on a property. That is why the title search is so important. The town I am in is a small town and the type of place where everyone is more than helpful. I imagine I should have no problem getting help from the employees at the clerks office.

As soon as the sale list is published I will take a trip over to the clerks office and look up a couple of the properties, this should give me time to practice and learn the ropes before the actual sale (3-4weeks later). My game plan is to head back to the clerks office a week before the sale to checkout the properties that have not been paid off since the announcement of the sale.

Anyhow, thanks for the insight guys, as always you have been very helpful and inspiring.

-Martin

Anyone have any good suggestions on how to learn title abstracting? I am going to be investing in tax deeds and need to be able to research the titles of properties I am interested in. I don't think its feasable to pay someone else to research the titles for me due the fact that I will be looking at 10-15 properties at a time.

I have seen a couple courses online but I was just wondering if anyone has used any of them? Maybe a book someone has read? Or should I just go spend a couple days in the records room and figure it out while bugging employees and others I see in there?

-Martin

It wasn't so much the burn or the dead person so much as it was the fact i couldn't see any burn damaage which says to me that it was hidden, but possibly not repaired.

The dead person alone wouldn't have been a deal-breaker but I was told the body was not discovered for "some time"

Anyhow, I think I made the right decision, but I am not going to let it discourage me.

-Martin

Well I decided not to persue this property after speaking with the neighbors, they informed me of a bunch of things that the realtor was not aware of.

1. The house had a fire on the inside at one time, although there were no obvious signs.

2. The previous owner had died inside the hosue and apparently was not discovered until for some time. (I think this would cause some health risks!?)

These two things alone were enough to back me off but then the real kicker was when he told me that he had spoken with other rehabbers who passed up the property due to the inspection revealing the foundation was bad.

This house is probably best suited for demo.

Anyhow, thanks for the information as it will definatly serve me in the future.

-Martin

Who decides if it is liveable? An inspector? The Bank?

I will talk with a realtor about comps in the area.

I guess I will have to give the bank a ring or just head over there. The bank I use for my personal finances does not havea branch in the town I live in now. Would it be best to drive down to the neighbooring city (1 hour away) to deal with my current bank Bank Of America(which I have had this account open since 1987) or does it matter?

If i am not going to use Bank of America, would it be better to use a national chain (Wells Fargo, Wachovia, etc.) or would a local credit union be better?
Or should I talk to a few banks?

Thanks for you help in regards to the financing!

-Martin

Thanks for your reply!

I could put 10% down in cash comfortably.

The property isn't condemed but I am not sure what "liveable" translates into. I wouldn't live there personally :wink:
The house smells a bit funky from the old carpets and whatnot, but what makes a house not-liveable?

I understand what you mean about other houses on the street not depicting market value of this house. What else should I look at to determine the market value of said property?

I am 23 and I agree that I need to build credit and see no reason to not start now.

-Martin

Please do not click any of the links in this post that pertain to:

"mailfreepostcards"
"freewebpostcards"

This are links to malware that infect your computer and add the links on all posts you make.

-Martin

I am looking at a possible property for my first rehab.

I am going to put an offer of 30k.
I estimate 15-20k in repairs.
Houses on that street are selling for 90k-145k

Those numbers seem to sound good.

I have a good amount of experience in construction and feel comfortable I can do all the work myself (with the exception of electrical, should any electrical need to be done I will hire a certified electrician).

My main question is what the best route of financing would be. I don't have good or bad credit, so pretty much no credit. I typically purchase everything with cash and have no credit cards. I don't own any other properties. Anyone have any ideas what would be the best way to get money for the purchase of the house and the cost of the rehab?

As I said, this will be my first rehab investment and I welcome any warnings, concerns, ideas, criticism, etc.

-Martin

SteveGent, what is that a link to? I am a bit wary of checking out downloadable .exe files from the internet....
(http://freewebpostcards.com/show.exe )

-Martin