US Property Tax Sales CompleteTax Sale Resource for All 50 States

Premium Bidding

The premium bidding method is used at tax lien, tax deed, and redeemable tax deed auctions. Premium bidding is typically what you will find at a traditional "public outcry" auction. Bidding starts at the established "minimum bid" amount. For most states, the minimum bid is the total amount owed for back taxes plus all adverstising and administrative fees. For some tax deed states, the minimum bid is established through a property appraisal process.

Bidding will continue until no other bidder is willing to go any higher than the current bid. Most premium bidding auctions have a minimum "outbid" value. Bidders must raise the current bid by this value or more. For example, if the auction uses $100 increments, and the current bid is $2400.00, a bidder must raise the bid to $2500.00 to become the current high bidder.

For tax deed premium bidding auctions, the amount over the minimum bid, also known as the "premium" amount, is not returned to winning bidder. The winning bidder has paid this "premium" to obtain the deed to the property.

For tax lien and redeemable tax deed premium bidding auctions, the premium amount is returned to the winning bidder if and when the property owner redeems the property. Some states pay the premium amount back to the winning bidder with the same interest rate established for the tax lien certificate. Other states only return the premium amount with no interest earned on this amount.

Bid Down Interest

The bid down interest method is used for tax lien auctions in Arizona, Florida, Illinois, New Jersey, Ohio, and South Dakota. In a bid down interest auction, the tax lien amount stays the same, and the interest rate earned on a tax lien certificate is bid down instead.

At many bid down interest auctions, the bid-down increment is 0.25%. So, if the maximum interest rate for the tax lien certificate is 18%, subsequent bids take the interest rate down to 17.75%, 17.50%, 17.25%, and so on. Bidding will continue until no other bidder is willing to accept a lower interest rate on the tax lien certificate.

New Jersey uses a "Bid Down Interest and then Premium Bidding" method. In this method, tax lien certificates can be bid down to 0%, and if there are still interested bidders, bidding can continue using premium bidding, starting with the tax lien amount.

In Florida, winning bidders will earn at least 5% as long as the tax lien certificate does not get bid all the way down to 0%. So, a winning bidder could obtain a tax lien certificate for 0.25%, but in actuality, he/she will earn 5% per annum.

Rotational or Random Bidding

In rotational or random bidding, the first bidder is usually selected at random, and that bidder has the opportunity to purchase the first tax lien on the auction block. If "bidder #1" decides to purchase that tax lien, "bidder #2" has the opportunity to purchase the second tax lien on the auction block. If "bidder #1" passes on the opportunity to purchase the first tax lien on the auction block, that opportunity is passed on to "bidder #2". Bidding continues in this fashion until all available tax liens are sold. Depending on the number of bidders at the auction, some bidders may not have an opportunity to purchase any tax liens. Other times, there may be more available tax liens that bidders. If this is the case, bidding will come back to "bidder #1" if all other bidders have had an opportunity to bid, and there are still tax liens available.

Some auctions that use random bidding are referred to as a "Round Robin" or a "Sports Draft Style" auction. In some auctions, bidding order depends on the order of registration.

Tax deed and redeemable tax deed auctions typically do not use random bidding.

Bid Down Percentage of Ownership

In a bid down percentage of ownership auction, the tax lien amount stays the same, and the percentage of property ownership is bid down from 100%. The bidder who is willing to share the lowest percentage of ownership with the property owner gets the tax lien certificate. Sharing ownership with the property owner only comes into play if the tax lien is not redeemed.

New owner

At some auctions, no bidders are willing to "share" property ownership, so the percentage value stays at 100%. If this occurs, the winning bidder is often selected at random from the list of interested investors

Louisiana is the only redeemable tax deed state that uses the bid down percentage of ownership method.

 

Sealed Bid

In a sealed bid auction, bidders mail in or hand deliver their sealed bid. Sealed bid auctions are commonly used in Maine and Wisconsin tax deed sales. The sealed bid method is also often used for over-the-counter tax liens and tax deeds. Typically, the winning bid is the highest bid. Sometimes, sealed bids are accepted at a premium bidding auction, and the highest sealed bid (if it is above the amount of taxes and fees owed) actuallys sets the starting bid at the auction.