Tax Lien Lady's Step by Step Guide: How to Prepare for Your
First Tax Sale
To be a successful bidder at a tax lien sale, you must be
prepared. It's a good idea to attend a couple of sales before
you actually start bidding on properties. This way you can
become familiar with the bidding procedure, which is different
in each state. In New Jersey (the state that I primarily invest
in), new people are always amazed at what actually happens at a
tax sale. It's not what they expect. They expect to bid a
healthy interest rate on a lien and are totally taken by
surprise when the bidding goes down to zero and then up into
very high premiums.
There are a few things that you need to know before you bid at a
tax sale. First of all you need to pay in full with cash or
certified check for anything that you are the successful bidder
on. Some municipalities will accept attorney's checks and/or
money wires, but most tax collectors will only accept cash or
certified funds payable to the municipality. Some tax collectors
will allow you time to go to the bank after the sale to get a
certified check, but some will not. You will need to know ahead
of time if you will have to pay immediately after the sale or if
you will be given time to go to the bank. If you won't be able
to go to the bank after the sale, you will need to have the
required funds with you. Do not wait until the day of the sale
to learn what forms of payment are accepted, or you could loose
a successful bid.
Get in touch with the tax collector a few days before the sale
to verify the time and place of the sale, find out what forms of
payment are accepted, and whether or not you need to register
ahead of time. Keep in mind that in most cases, half of the
properties that are on the original list for the sale will be
paid off and no longer available. You don't want to waist your
time doing due diligence on all of the properties on the
original list. The tax collector should be able to give you an
updated list with the current properties in the sale. In many
cases the tax collector will fax you the list. A few
municipalities will have their lists on their website. For very
large municipalities you may have to go pick the list up at the
tax collector's office. Once you have an updated list, you'll
need a day or so to do due diligence on the properties. Even
though you are not buying the property, you want to make sure
that you're not buying a tax lien certificate on a worthless
property.
So how do you know how much money to bring, since you don't know
if you'll be the successful bidder on the properties that you
want to bid on, or how much premium, if any, you will have to
pay? We have our own proprietary software program that generates
a bidding form to tell our bidders which properties to bid on
and how much they can pay for them. You can put together your
own form with this information to have in front of you at the
sale. If you're bidding in a state that goes into premium,
you'll need to calculate just how much premium you should pay
for the properties that you're going to bid on. The software
program that I use, Tax Lien Manager