Tax Lien Property: Increase Odds of Getting a Property by 5 Times!

Going blindly into tax lien auctions and expecting to obtain cheap properties is not something you can expect to happen. The fact is, 93-98% of all tax liens purchased at a tax lien auction will eventually pay off, leaving the investor with only interest and no property.

However, there is a 3-step approach to tax lien auctions that will easily increase the number of properties you obtain by 500% or more.

Step 1: Pre-Sale Intelligence and Marketing

If the tax lien auctions you’re pursuing have a large number of liens offered, make sure to get the list on a spreadsheet along with assessed value of each property. Eliminate those properties that have a very low assessed value – it’s unlikely you’ll be able to make much of a profit from these even if you can get them for free or nearly free.

This will significantly reduce your list size and make it more manageable.

Next, send a postcard to each owner remaining on the list, with a simple “We Buy Property” message. Most investors never think to send marketing to this group of owners, even though they’re some of the most motivated or indifferent owners out there.

When you get calls from this postcard, determine whether the owner is letting the property go, wants to sell, or is trying to keep the property. If the owner says they’re just letting the property go, offer a token payment for the deed and resell the property. Use the buyer’s purchase funds to redeem the taxes and get your profit.

If the owner wishes to sell the property, but at a more significant price, get the property under contract and flip the contract to a cash investor. You’ll find cash investors investing at the tax lien auctions by the way – get the registration lists the county requires from past sales to obtain their names.

The most important part of Step 1 is to save the returned mail you get from your postcard campaign. Make sure you mail the postcards with a proper return address and with a postage level that allows for returned mail (no third class mailers!)

Step 2: Buy the Right Liens at the Sale

In your hands right now are the sellers least likely to redeem their properties from the upcoming auction. You’ve mailed to postcard to the address on file with the county, and that’s the same address the county has been using to try to send the owner tax bills and notices about the tax delinquency. It’s also likely the address to which the tax lien buyer will have to send notices about the tax lien auction.

Since you have a postcard sent back “returned” in your hand, you know that the owner likely does not know about the tax delinquency and will not be able to receive any further correspondence about tax lien auctions involving the property. This dramatically increases the chances that the property will not redeem and that you’ll someday obtain a deed to it if you buy the lien at the upcoming auction.

In our experience redemptions rates for liens with bad mailing addresses are only about 50% likely to redeem.

Another quick check you can do is to run each owner’s name through the social security death index (just google it to find it). Properties still titled in a deceased owner’s name also have only about a 50% chance of redeeming from tax lien auctions in our experience, down from 93-98% overall.

If you don’t have a lot of capital, you can skip the tax lien auctions and go to step 3. But if you do have capital that you’d like to earn 10-20% interest on, and have a great chance of actually getting properties, do everything you can to buy the liens with deceased owners or bad mailing addresses.

Step 3: Buy Properties Sold at Previous Tax Liens Sales From the Owners

Go around to nearby counties and get the sales results from past tax lien auctions. Find out which liens actually sold, and cross off the liens that have paid off in the meantime. This will leave you with a list of active tax liens. When the deadline toredeem is within 1-2 months, aggressively contact the owners left on the list, using skiptracing methods like Intelius if necessary, and get an offer into their hands. Motivation should be high with most sellers to get something out of their property before it’s lost completely.

Using this 3-step method, you should be able to obtain many properties from tax lien auctions, either directly from the auction or indirectly by purchasing from the owner. This is only one of 12 ways to profit from tax deed and tax lien auctions creatively.

{ 12 comments… read them below or add one }

Philip Ozorio April 27, 2013 at 6:22 am

Want to learn the method to obtain the property

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Jep Tatum August 8, 2013 at 5:02 am

I attended a tax sale in Georgia this past Tuesday. Some properties were sold at auction and some were not. In ten months if I approach the owner who lost the property in the tax sale about buying his property during the redemption period I know I am responsible for the bid price at the auction plus taxes and interest accrued since the day of the auction but what about any excess money that was collected by the county at the auction? Who gets that money?

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Rick Dawson August 8, 2013 at 9:14 pm

It goes to the owner at the time of the tax sale. You would have to work out some kind of deal where you would recover that money, or some of it, as part of the deal. Otherwise you will have just paid 120% of what the bidder paid, which, unless the property was sold quite low, will probably not be a good deal.

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Anthony August 10, 2013 at 10:23 pm

What are some of the other 12 ways to get the Deed to the Property?

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Rick Dawson August 19, 2013 at 5:06 pm
shahida begum June 29, 2014 at 10:16 am

using skiptracing methods like Intelius if necessary, and get an offer into their hands. Motivation should be high

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Joanne Armstrong November 4, 2014 at 5:32 am

Hi Rick, Prices at the local tax sale auction in SC have doubled or tripled from what they were in 2009-2011. It's time for an alternate strategy. How do I go about purchasing the right to redeem the property from a former owner? In that case, does the overage go to the former owner, the owner of record at the time of the sale, to the new owner who redeems the property, or is that negotiated and part of our document?

Thanks very much! I am a Deed Grabber student, very happy with your material. How do I get back on the Webinar email list? How do I listen to recordings of the calls?

Thanks very much,

Joanne

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Rick Dawson November 4, 2014 at 5:44 am

It's usually not about buying the right to redeem - you usually just purchase the property in a fairly conventional way, while keeping in mind that the taxes will need to be paid by the deadline. If you're trying for the overage by doing this it can become more complicated and more state-specific. We're mostly talking about buying properties to resell in this series.

We'll try to plan some more calls soon and will be sure to let you know when we have them

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Brenda February 12, 2015 at 2:02 am

Okay Rick, so the tax sale has occurred and an investor is holding the certificate until the redemption period is over, I aggressively pursue the property owner (s) to purchase the property before the redemption period ends...my question is what happens to the mortgage? If I buy the property from the owner who is about to lose his property to the tax sale investor am I also acquiring his original mortgage as a new home owner. How am I a winner using this method - please help??

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Rick Dawson February 23, 2015 at 10:09 am

You're assuming the property HAS a mortgage in the first place. If you are somehow aware that it does have a mortgage which results in no equity, don't pursue that one. It's one of the first questions I ask when I speak to the owner, if they have a large mortgage I'm off the phone and on to the next one. Of course I don't just take their word for it but if they say they DO have one I know I'm onto the next.

Most properties with mortgages do not get past the tax lien sale stage without the bank stepping in and paying. Therefore, the longer time goes by, the less properties have a mortgage on them as these property redemptions are getting paid off by the banks mostly.

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Rose June 4, 2015 at 3:57 pm

"Most properties with mortgages do not get past the tax lien sale stage without the bank stepping in and paying. Therefore, the longer time goes by, the less properties have a mortgage on them as these property redemptions are getting paid off by the banks mostly."

That sounds like valuable information. If I am reading you right it helps to just first search for older liens where the owner would have paid off more.

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Rick Dawson June 4, 2015 at 4:34 pm

Just about any lien that's making it to the sale process (or is being foreclosed) is "older"...meaning should have been paid off by now.

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