Beyond the Basics of Tax Lien Investing: Ready to Invest Online?
You have purchased several tax rights and/or tax documents and now want to branch out into other areas by investing online. Or maybe you haven’t even started investing yet, but you want to invest in a lien state and you live in a tax deed state or vice versa. Or maybe you don’t live in the US but want to invest in tax rights or tax deeds in the US. You’ve heard that you can buy liens or tax deeds online, and you think that sounds like the right way to go.
But are you ready to buy tax liens or tax documents online?
Here’s what you need to know about buying tax liens and documents online before you get started:
1. Only a few states offer online tax sales, although the list is constantly expanding as more counties find it easier to sell their tax sale properties online. As of this writing, there are 8 states that have counties or municipalities that conduct online tax lien sales, and 6 states with counties that have online tax lien sales. The number of states that have online lien or tax document sales has doubled in the past few years, and each year new counties go to online auctions.
2. Once a county moves to online sales, bidding becomes more competitive, so be prepared for the competition. Also, most of the online tax sales require a large deposit before you are allowed to bid. The deposit usually has to be a few days before the tax sale starts, so online tax sales are not tax sales that you can register a day or 2 before the sale. You must register and receive your deposit early. Sometimes you need to be registered and have your deposit weeks in advance, and other times you just need to be registered and have your deposit before the bidding ends.
3. Although most online auctions require you to register only once for the tax sale, some online sales require you to register with both the county tax officer or treasurer and the online auction site.
4. You will need to have a US bank account to participate in any online tax sale. For some tax sales, you’ll also need proof of your age (your driver’s license or birth certificate will suffice), and for tax lien sales, you’ll need to provide a W-9 form with a US tax identification number.
5. All online tax sales are done only once a year.
6. You will need to do due diligence on tax sale properties, more due diligence is required for tax documents than for tax liens. For tax liens, at a minimum, you will need to obtain information about the property’s tax assessment, find the market price for the property, drive by the property and look at it (or have someone else look at the property for you). If you are investing from another state or country and cannot physically view the property, you can look at a satellite photo or aerial map of the property, but it is best to find someone who can actually view the property and photograph it for you.
7. If you bid on a property by mistake and you’re the winning bidder, you’re stuck with it. There are no refunds. And if you don’t pay for your winning bids, you’ll lose your lien, your deposit money, and you’ll be barred from future tax sales in that county.
Now that you have a good understanding of what is involved in buying tax liens online, you will be better prepared to successfully bid on online tax sales. However, this is not all you need to know, but it is a guide to get you started. You will learn more as you actually invest. Just be sure to read all the terms and conditions of the sale and do your due diligence on tax sale properties before you bid.
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