Curious how minimum bids are set at tax sale auctions? In this video we explain the behind the scenes process of the county establishing minimum bids.
Transcript:
Hi there! Casey Denman here with TaxSaleAcademy.com, answering your weekly question. This week’s question comes from Ellie. And Ellie says, “How are minimum bids established for properties at tax sales?”
Ellie, thank you very much for submitting your question. In most scenarios, the minimum bid will be the amount of the back due taxes, the amount of the interest that has accumulated – and we’re talking interest that could be charged by the county or as dictated by the tax certificate in these hybrid states, plus the extra fees. Now, the extra fees will vary state by state, and even county by county. Some states, for instance, will require the property to be advertised at the local newspapers. So that could be an additional $30 to $50 fee. Other states have mandatory foreclosure fees which can add another $100 or $200 onto the purchase price. But typically, the minimum bids will be established by totaling up the amount of the back due taxes, the interest and the fees. Now, sometimes some counties will round it up or down or maybe to the nearest hundred dollars or so. But for the most part, that is what it will be established by.
Now, in some states, what they’ll do is if nobody bids that minimum bid, and if nobody bids whatever the taxes, interest and fees total, then they will have a secondary auction. That auction will be a nonreserve bid. It will start a lot of times at $0 or a nominal amount like $50 or $100. And in these situations, all they’re trying to do is get the property into a responsible taxpayer’s hands. Basically, somebody that will pay the taxes for that property in the future so they can return that property to the tax roll as a tax revenue-generating property.
In other states where they don’t have this second option, they offer these properties where you can buy them over the counter at discounted prices, or in some states, you can even petition the county commissioners or the county department of real estate to sell the properties to you at a discounted rate much below whatever the minimum bid that was established. So if you don’t want to buy properties at minimum bid or you think it’s too high, maybe because it’s a special assessment or something and nobody else bids on it, it is possible that you can eventually get these properties cheaper. But most of the time, the minimum bid is very, very low and you’ll have a lot of equity, even if you did pay that minimum bid.
So Ellie, I hope this has answered your question. If you have a follow-up question or if anybody else has any questions about tax sale investing, please submit them to me. Head on over to my website at TaxSaleAcademy.com, which you can do by clicking the blue link at the bottom of this video. Again, it’s the TaxSaleAcademy.com. Once you’re there, submit your question and it’s very possible I’ll give you a video response just like this one.
Have a wonderful day, folks! Bye-bye.