Property owners s who failed to sell their property during pre foreclosure and have failed to meet their tax obligations , the government will seize their property. The government often sells properties that it has acquired through tax foreclosure to people who can pay the taxes that are owed, providing an first-class real estate investing opportunity.. They are sold in transactions named tax deed sales or tax foreclosure sales. The government does this to recover the taxes that the original homeowner did not pay.
In selling these properties under tax foreclosure, the government offers the unpaid taxes, the liend, the interest for those amounts of money, and the selling costs involved to interested investors in a public auction sale. In case there are many prospective buyers of these liens, the winner is awarded the properties in any of the following methods:
-Bid Down the Interest Method – The government fixes a maximum rate of return and the bidders have to stay within that rate limit specified. The investor accepting the lowest rate of return among the bidders is declared winner of the tax foreclosure property. In cases of ties on the bids, the impasse is solved through a random or rotational method.
-Premium Method – In the premium method, an investor who is willing to pay the highest premium on the lien amount is declared the winning bidder. This method is used and preferred in some parts of the country for selecting the winner at an auction.
-Rotational Selection Method – The real estate investor listed first in the list of bidders gets the first offer of the liens in the rotational selection method in the auction. In case he declines, the investor next in line is made the offer. The first bidder, who declined in the first round, is offered another lien only after an equal chance has been granted to all expected investors that are included on the list.
-The next method is the random selection – In this method in an auction,a random process is used to select the potential investor, usually done through the use of computers.
-Bid Down The Ownership Method – The lien in this method given to the bidder who buys the property at its lowest cost. If he buys it at 90% of the property cost, and in case of redemption of the lien by the original owner, this investor would only be eligible for 90% ownership and the remaining ownership of 10% would go to the original owner of the property in question.
Not all liens get sold right away in an auction and when this happens, the unsold liens remain in the hands of the government entity that conducted the auction. It could conduct another auction afterwards. In the meantime that the liens are unsold, the unsold liens are called “struck” liens.
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