In my personal opinion, buying over the counter tax lien certificates can be an excellent strategy for minimizing competition and maximizing profits. Many people do not realize this but tax deed properties are also available over the counter.
Recent figures indicate that the opportunity to buy tax lien certificates will continue into the foreseeable future. In fact, the Wall Street Journal recently stated that real estate tax delinquencies are on the rise and total approximately $15 billion nationwide.
Recently, CNN Money estimated that between $7 billion and $10 billion worth of tax liens are sold to banks and investors each and every year.
Running the numbers, there's between $5 billion and $8 billion worth of unsold tax lien certificates and/or tax deeds each and every year. Which means there's still a lot of opportunity to buy tax lien certificates.
What happens with the tax lien certificates that are never purchased?
More often than not there's more tax liens available than investors to buy them. Often, unsold tax liens and tax deeds are transferred to the county where they can be purchased over the counter.
In a normal tax lien certificate auction investors compete for the right to purchase each tax lien certificate. It is through competitive bidding that the interest rate is reduced and the tax lien is sold to the investor willing to accept the lowest interest and/or penalty rate the purchaser would receive in the event the tax lien is redeemed.
The great thing about these over-the-counter tax lien certificates is that they can be purchased without having to attend the tax sale auction. Since there's no auction there's nobody else bidding AND nobody else driving down the interest and/or penalty rate the purchaser would receive in the event the tax lien is redeemed.
When buying tax lien certificates over the counter, the purchaser is locking in the maximum interest rate set by state law.
With the explosion of the Internet tax collectors are making it possible to buy these over the counter tax liens and tax deeds online through the tax sale website. The sale of tax lien certificates and tax deeds through the Internet can be a huge time and money saver. If a hands on approach is more favorable the purchaser can simply walk into the tax collector offices and purchase them over-the-counter.
In most tax deed sale auctions properties are sold to the investor with the highest bid. It is through the competitive bidding process that the price to purchase the tax deed property is increased and the property is sold to the investor willing to pay the most for the property.
Purchasers can skip the auction and the competitive bidding process often getting these properties for just the back taxes.
Buying over the counter can be a fun and exciting way to get started with tax lien certificates and tax deeds. I'm not a legal or financial advisor but in my personal opinion, tax lien certificates are the ideal investment. I would encourage anyone considering buying tax lien certificates to discuss it with a properly licensed legal, financial, or accounting advisor so they can know what measures need to be taken to avoid costly pitfalls. Here are a few but not all of the pitfalls of tax lien certificates and tax deeds.