I’ve got a few questions in mind about over the counter liens lately. Apparently there are some tax lien investing “experts” out there telling people that tax lien sales are so competitive that you are better off buying the OTC tax liens and deeds that are left over from previous tax sales.
These gurus tell you can get good liens at the maximum interest rate by purchasing these liens directly from the county. And that if you purchase liens from the county that were struck off to the county 2 or 3 years ago, you will be able to foreclose right away.
Part of this is true, if you purchase an older lien from the county, you will be able to start the foreclosure process sooner, because the redemption period has already started, and may already be over. But have you considered that if tax sales are so competitive that you’re not likely to get a “good” interest rate at the tax sale, there may not be any good liens left-over after the sale. Many counties will re-bid properties that don’t sell the first time, either right after the sale is over, or in another tax sale. So in many counties tax properties have to survive 2 tax sales before they get onto that left-over list. Almost all of the left-over properties are junk properties. Yes you can get the maximum interest rate, yes you will probably be able to foreclose and get the property – in which case you do not get your money back. And then how are you going to sell an unbuildable piece of land, or otherwise junk property and get your money out of your investment?
Sometimes a good property does get onto the OTC list, but that’s usually not because it didn’t get any bids in the tax sale. Sometimes bidders don’t have the proper form of payment, or don’t pay up by the deadline. In that case the property will go onto the left-over list. But there are thousands of investors who wait until this list is available and bid on these properties right away. And since properties on this list are offered on a first come, first serve basis, the early bird gets the worm. The juicy worms are pretty much gone by daybreak!
There are investors who do well using this strategy. For one thing it is very time intensive. You really have to do your due diligence carefully if you want a deal and not a dud. The best way to work this strategy is to be at the tax sale and note which tax liens are not sold, and then get that left-over list as soon as its published and take action immediately. This way you will know what properties are likely to be on the list from the last sale that are good properties and not junk, and you can do your due diligence on these properties ahead of time. So that when the list comes out you can submit a bid right away.
Robert J Russell is licensed in Real Estate & Insurance – visit http://www.robertjrussellcompanies.com to find out more about investments and real estate.