Just received emails from the online auction websites for both Coconino county and Yavapai county in Arizona. Bidders can only have ONE account in this year's auctions.

Two counties in Florida applied this same rule last year and the number of bids was cut drastically. This gives the individual investor a better chance at winning liens.

I commented in my Blog posts and in BP forum posts after the auctions last year at the dramatic increase in the Arizona lien auctions last year.

2013-northern-arizona-tax-lien-results

The way the online auction bidding works is you bid the lowest rate of interest you would accept on the lien. In AZ the bidding starts at 16% and you place your bid at the lowest (round number) rate you would accept on that lien.

Let's say you bid 7% on a lien. If three other bid 7%, then the auction software does a random pick out of the four people who bid 7% as the winner.

The counties used to allow a person or entity to have multiple "sub accounts" to place bids. All you needed was to have separate Tax ID's and you could tie all the accounts together to bid. So the banks and funds would create sub-accounts for all their customers. Some banks would have over 200,000 sub accounts.

Now imagine you and the bank had bid the lowest rate on a lien (7%). The software would randomly pick the winner from the list of accounts that bid. So you had your one account against the 200,000 accounts the bank used to bid against you. What do you think the odds are your one account would be chosen?

This is a nice step to even the playing field a little. The banks and funds will still bid - and they bid fairly low rates because even a 4% return is better than other very short-term instruments. But on the liens where an individual ties, the chances are better for the individual since the bank will have only a handful of accounts.

What I saw last year, was the banks that used to bid the huge number of accounts in Florida, moved to the Arizona auctions where they could still bid their monster number of accounts.

Now that they will be limited in AZ, they will move to other auctions.

I think we may see a slightly higher average rate on the AZ liens in these two counties this year if the banks move on to other counties.

The average rate won in 2012 in Yavapai was 10.54% before the influx of the banks/funds. In 2013 when the banks dominated, the average rates that won were 6.55%.

I'm thinking we'll see that average rate in Yavapai tick up a little bit this year when the auction results are posted in March. Same for Coconino.

I'll post results in the forum.