| Tax Lien Sale |
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The sale of tax liens for delinquent taxes on real estate, orchestrated by a governmental agency, typically at an auction. In a tax lien sale the purchaser buys only the lien on the property, not the deed. If the lien is then not paid back by the homeowner for whom the lien had been previously levied, plus interest, then the new lien holder can file for foreclosure and be first in line to be paid off, ahead of any other liens including mortgages. Just like in a Tax Deed Sale, there is a period of redemption in which the original owner has a window to pay back the lien. In a public (or online) auction, in the event that more than one bidder is pining for the same lien, the winner is decided in one of five ways, depending on the state. (1) Lowest Rate of Return: The bidder accepting the lowest rate of return is awarded the lien. If more than one bidder accepts the same low rate of return, they may use a random number generator to decide who is awarded. (2) Random Selection, usually by computer. (3) Rotational Selection: bidders are handed out numbers, the number one person may chose to accept the lien or refuse, if they refuse, it is then handed to the bidder with number two, and so on. (4) Premium: The bidder willing to pay the highest excess amount above the lien (or premium) wins the lien. (5) Lowest Bid of Ownership: The bidder willing to purchase the lowest percentage of ownership, say 90%, meaning they will own 90% of the lien and the original owner will own the other 10%, wins the lien.
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