As with all states, Indiana has a process to force collection of delinquent property taxes. Indiana sells liens against properties with delinquent taxes to the public.
When a property becomes delinquent, a list is prepared by the county and published. A tax certificate will be offered against each property if the taxes are not paid by the sale date.
The tax certificate is a first-priority lien against the property which is superior to any mortgages or liens that currently exist against the property. If the lien is not paid off within exactly one year from the sale date, the certificate holder can apply for a deed to the property, free and clear of all liens.
The first step when investing at an Indiana tax sale is to analyze all of the properties coming up at the next sale. This can be a daunting task, as some counties have up to 10,000 properties on the list, or even more.
You must not only determine which properties have any value, you must also decide the maximum amount you would be willing to pay for the lien for each property at the sale. This is because the liens are offered to the highest bidder at the sale.
It is important not to pay too much for a lien, because if you are not redeemed, you will own the property for the amount you paid for the lien, even if that amount is far in excess of the minimum owed in taxes, or in excess of the property's value.
Though the minimum bid for any lien is only the amount of taxes owed, liens for valuable properties will sell for over 70% of the market value of the underlying property in most cases, and at times in excess of market value.
This is due in large part to institutional bidders that come to all Indiana tax sale auctions, and many times invest millions of dollars at one sale alone. These institutions are after the attractive 10-15% returns that paid-off liens offer.
Therefore, they will try to invest as much money as possible at a sale, and do not mind paying 70-100% of property market value for each lien, because they know they will be redeemed (paid off)95% or more of the time.
Even though they might end up with some properties at the end that they will lose money on, it is more than made up by the interest they made on the majority of their liens which paid off.
This makes it extremely difficult for a small investor to acquire quality property from an Indiana tax sale at a good price.
The institutions tend to stay away from lower-end properties that they know will have a greater likelyhood of not redeeming. Therefore these will often be available for the minimum bid.
However, you get what you pay for. In today's market, many of these lower end properties cannot even be sold for $5,000-$10,000.
Keep in mind that you will also end up spending at least $1,500 in additional attorney fees to cover two different noticing steps that must be done at your expense, and a quiet title for the property. This must be done to get marketable title on the properties you acquire.
So, unless you are after the attractive return of 10-15% that can be made an Indiana tax sales, it is not advisable to invest for the purpose of acquiring properties.
You will either end up with low-end properties that cannot easily be resold for a profit, or pay too much for quality properties. And either way, you will have to wait nearly two years from start to finish to get marketable title to the property.
But there is an excellent opportunity to acquire bargain properties because of the Indiana tax sale system, without doing the tedious upfront research.
Let the tax sale buyers do the research, and buy liens against the property. This will automatically sort out the properties that have no value.
Then visit the county to get a list of the liens that are unpaid and outstanding. Contact the owners of the properties with liens, and buy the property before it's lost to the sale.
You'll find many owners who have walked away from the property and want to salvage something before it's lost.
Now you've eliminated all of the research and bidding, and have access to the properties without bidder competition.
About the Author:
Rick Dawson has earned the nickname "DeedGrabber" by purchasing dozens of properties out from under tax sale buyers.
Learn how to do the same with his 5-day email mini-course: "Go Ahead, Be a DeedGrabber". Just visit
DeedGrabber.com to get it now!
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646
Date Published :
Apr 15 2009