I went to my first ever tax lien auction on May 20, in Franklin County, Tennessee (my home county). TN is a "hybrid" state -- if you win the auction, you get a first lien on the property, and if it's not redeemed withing a year (all the past due taxes are paid in full) you automatically get a deed to the property. In 2015, the county was auctioning liens for overdue 2007 and 2008 county and city taxes, so all the available properties had at least 7 years of accumulated taxes.
I had so many questions before the auction. Apparently, because this was auctioning taxes not paid in the first years prior to the financial crisis, there were more properties on the block than ever before in Franklin County - over 40. It started off with the county attorney doing the first listing so it was slow. After that one (which no one wanted), a county sheriff, who's also a professional auctioneer, took over. It got more hectic.
The properties were listed alphabetically by owner, so sadly for me, the one I really really really wanted was second on the list. Before it started, I had no idea whether this property would be hotly contested or whether I'd be the only one interested. Turns out, there were 3 other parties bidding against me. I'd decided in advance my maximum bid (figuring the taxes owed, the value of the lot and the cost of scraping the existing house if it came to that). I ended up bidding over my max bid, then dropping out to a very enthusiastic bidder I was kind of scared of. We were the two left in the bidding, and he won. Final bid was $5,500, and I figure the total taxes owed are around $5,000 including court fees and interest.
I'm kicking myself because, in hindsight, I see I didn't completely understand the process. As I understand it now, the winning bid pays the current taxes & interest due, and if the lien isn't redeemed by the owner in a year, any amount bid over the amount due rolls toward the future year taxes. I thought my bid would be 2007-2008 taxes only, and the additional years would be the price of winning. What I think I understand now is that, for instance,, if the taxes due for the bid year are $500 and you win at $5000, the extra $4500 is essentially pre-paid 2009-2013 taxes for when you get the deed.
If the winning bid is over the total amount of accumulated taxes, interest and fees, you're all paid up and the rest is gone bye-bye.
The guy that beat me got the lot and the little old country farmhouse for the total of taxes due 2008-2013 -- his winning bid covered it all. The point here is, because I thought my bid would only go toward 2007-2008 (and not subsequent years), I calculated my maximum bid way too low.
I'd been trying to contact the owners (out of state, inherited the house, in financial difficulty themselves) in vain since September 2014, so I am almost 100% sure that they will not redeem the tax lien, or even know it's been sold. I was prepared to offer $15,000-$$20,000 to buy it outright. If I'd understood that a $5,500 bid included ALL the back taxes, I could and would have gone much higher in the bidding.
Theoretically, I could still have a chance at the property. I could offer to buy the lien from the winner, making him a quick profit (but I suspect he wants the property more than a profit. He's already put a tarp over the leaking roof -- exactly what I planned to do, except I would have done it in brown instead of totally obvious blue).
Or, I could swipe it out from under him. I have a year to continue to try contacting the owner for a purchase -- I could even get myself to Ohio and knock on their door and force the issue! If I could do that, I might get the property for what I'd originally intended, plus the owners would get some badly needed money instead of a big fat NOTHING by losing it in the auction.
I'm still trying to decide whether this is a dumb or smart move -- maybe the fates are trying to tell me I'm overextended right now and better deals might come along soon???
In probably a dumb move, I stayed after this property was auctioned and bid on another, a small lot next to a dentist's office and across from the railroad tracks in TinyTown, TN. I bid, and won the lot, for maybe a bit over the total amount of the taxes due. I'd researched it beforehand and driven past it the morning before the auction. It's tiny, but at least the burned down house on it has been scraped and it's an empty lot. Taxes $69/year, so not too much of a burden.
Tips for auctions that I didn't know before -- 1) sit in the back, so you can see who's bidding against you. 2) try to get an understanding of how the payments are applied (I could have done this, but I had no idea what I didn't know, so I didn't know to find out -- ya' know??), 3) go to an auction in advance of one you want to bid in (I didn't have the chance, since Franklin County only does this once a year, and 4) pray the properties you want are at the end of the list so you have time to get your bearings before it really matters!!
So, I bid, I lost, I learned, I have a teeny lot in Cowan, TN. Anybody want to build an office building next to Dr. Elkins the Dentist??
