Tax Lien Auction

A tax lien auction is a public sale organized by a county or municipal government to sell tax lien certificates on properties with delinquent taxes. These auctions serve a dual purpose: they allow the government to recover unpaid tax revenue while providing investors with an opportunity to earn returns secured by real property.

Tax lien auctions can be conducted in person at a physical location such as a county courthouse, or increasingly, online through platforms that allow bidders from across the country to participate. The format of the auction varies by jurisdiction — some use a bid-down-the-interest-rate system where the winning bidder accepts the lowest interest rate, while others use premium bidding where investors bid amounts above the lien value, or rotational systems where liens are assigned to bidders in turn.

Preparation is key to success at tax lien auctions. Experienced investors begin their due diligence weeks or months before the auction date, researching available properties, determining maximum bid amounts, and developing a strategy based on the specific auction format. Many jurisdictions publish lists of available liens well in advance, giving investors time to research each opportunity.

Competition at popular auctions can be fierce, especially in states with high interest rates. Institutional investors and hedge funds have entered the market in recent years, driving down returns in some areas. However, opportunities still exist for individual investors, particularly in smaller counties with less competition or through over-the-counter purchases after the auction.