When owners fail to pay their property taxes, the county must make an effort to recoup the lost revenue. Property taxes help fund county budgets, and county leaders cannot afford to wait for payment. One way to accomplish the collection is by issuing tax lien certificates. As their name implies, tax certificates are priority liens that attach directly to the underlying real estate. The liens remain on the property until the owner pays the delinquent tax amount or an investor purchases the tax lien.
Annual Public Auction
Every year, counties hold annual tax lien certificate public auctions. To participate, you must apply online or go to your local county tax collector’s office and complete the application there. You can bid on as many certificates as you want, but be prepared to pay for each certificate in full as soon as the bidding is completed. As of 2013, the following states have annual public auctions: Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Mississippi, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Oklahoma, South Carolina, South Dakota, Vermont, West Virginia, Wisconsin and Wyoming. Washington D.C. also conducts an annual public auction.
Online Annual Auction
Counties of a few states conduct their annual tax lien certificate auction online. You must open an account online with the county tax collector before the scheduled auction date. Some counties require that you deposit funds in your account before you can bid on any certificates. The states that have auctions online are Arizona, Colorado, Florida, Indiana and Maryland. Some Florida counties, such as Alachua, Brevard and Sumter, have turned their tax lien certificate sale over to online auction site Bid4Assets.
Over the Counter Sales
When an auction ends, there may be unsold tax liens certificates. Rather than keep the certificates until next year’s auction, the county sells them directly to the public. You can get a list of available tax lien certificates at the county’s website. After selecting the certificates, you mail your payment directly to the county tax collector. Upon receipt, the tax collector will send you the tax lien certificate and mark the lien as sold on the county records. The following states have over-the-counter sales: Alabama, Arizona, Arkansas, Colorado, Florida, Maryland, Mississippi, Montana, Nebraska, New Jersey, South Carolina, South Dakota, Tennessee, Texas and West Virginia.
Year-Round Online Sales
Some states sell their remaining tax lien certificates online. Participating counties list the available certificates on their website. After opening an online account with the tax collector, you select the certificates you want and pay for them electronically. The tax lien certificates are held in your online account. The states that have online sales are Arizona, Colorado, Florida, Indiana and Maryland.
- Tax Lien Properties: Not All States are Tax Lien States – Some States are Tax Deed States
- Bid4Assets: Florida Tax Certificate Sales
- Real Estate Tax Investing: Over the Counter Sales
- Ignite Point: Buying Tax Liens Online
- Internal Revenue Service. "Understanding a Federal Tax Lien." Accessed Jan. 24, 2020.
- Internal Revenue Service. "Publication 594: The IRS Collection Process," Page 5. Accessed Jan. 24, 2020.
- City and County of Denver. "Delinquent Taxes and Tax Lien Sale Information." Accessed Jan. 24, 2020.
- Weld County Government. "Tax Lien Sale." Accessed Jan. 24, 2020.
- State of California. "Public Auctions and Bidder Information." Accessed Jan. 24, 2020.
- National Tax Lien Association. "Common Questions about Tax Liens." Accessed Jan. 24, 2020.
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.