Buying Your First Tax Lien (In Person)
You are ready to make the jump into the world of tax lien sales, but you are not sure where to start. I can help. If you still have questions about what a tax lien is, start by clicking here, then come back and read this.
Tax lien auctions are usually held from June to December, with exact dates varying based on the county. Floyd County, Indiana for example held their online auction for 2019 taxes in June 2020. Charleston County, South Carolina held their auction for 2018 delinquent taxes in person in December 2019.
Sales are held one of two ways, online or in person. Online sales are convenient for investors who want to find deals out of state. However, I have found that in person sales are more common. I will break down what to expect from an In-Person auction using Charleston county, SC as an example.
This will be a walk through of what to expect when bidding on Real Property, not Mobile Homes as those fall under different rules.
On November 8th, 2019, the county posted a list of delinquent taxes that would be available at the sale. From November 8th until December 6th, potential bidders (you) would have had the chance to register for the auction.
This is important: Most auctions require you to register prior to the auction and bidders may not register for the auction after the cut off. For any tax sale, pay attention to when you need to register by. Most auctions will also charge a registration fee, in my experience this is usually around $10. You also have to provide a valid government issued photo ID.
On December 9th, bidders attended the auction held at the North Charleston Coliseum starting at 9am. Bidders were given a final list of properties on which tax liens were being sold. This may or may not have been the same list published on November 8th. Property owners would have been given the chance to pay their taxes up until December 6th to prevent their property taxes going to auction.
If you won the bidding on a parcel, you would have had until the end of the business day to pay the full amount. Charleston County accepted personal checks last year, but not every county will. If you refuse or are unable to pay the amount bid, you would have been charged $500 per bid and would likely be barred from participating in future sales. This is a common rule across counties.
From the day you purchase the lien, the lien begins accruing interest. The interest rate for Charleston County liens sold in 2019 was 3% for the first three months, 6% for months four, five and six, 9% for months seven, eight and nine and last three months 12%. This interest accrues until the property owner redeems the lien (pays the delinquent taxes as well as interest and any other penalties and fees).
Another important note: Keep the original sales receipt. Charleston County requires this receipt for a refund check to be issued to you.
The property owner has 12 months to redeem their property taxes. In Charleston County, 30 days after the redemption period has expired the property will be “conveyed by tax title to the successful bidder”. Which means, the title will be turned over to you, the bidder. There are applicable fees associated that you must pay, of course.
If you do acquire property this way, there is no warranty and the county assumes no liability for the quality of the property.
Quick Recap:
1) Register for tax sale (will likely need W9 and photo ID)
2) Attend tax sale, bid on property
3) Pay the full bid
4) Get money back via redemption OR acquire property via tax title
Disclaimer: Rules can vary from county to county even within the same state, and from year to year within the same county. This was a break down of Charleston County specifically, but you will see similarities between other In-Person auctions.
Other counties have different redemption periods, and in some counties you will have to apply for the tax title, it won’t be assigned automatically like in Charleston County.
Another Disclaimer: Tax Titles can come with their own complications, you’ll likely need to get a quitclaim deed from the previous owner.
If you want to learn about how to buy tax liens in online auctions, come back next week, I’m writing about that next.
If you want to learn more about Charleston County and where I got my information, click here. It’ll take you to the county’s tax sale website.
Drop your questions in the comments.
As always, I am but a work in progress.
Cheers.
KANB
