Tax Lien Lady's Step by Step Guide: How to Prepare for Your First Tax Lien Sale

To be a successful bidder at a tax lien sale, you must be prepared. It\'s a good idea to attend a couple of sales before you actually start bidding on properties. This way you can become familiar with the bidding procedure, which is different in each state. In New Jersey (the state that I primarily invest in), new people are always amazed at what actually happens at a tax sale. It\'s not what they expect. They expect to bid a healthy interest rate on a lien and are totally taken by surprise when the bidding goes down to zero and then up into very high premiums.

There are a few things that you need to know before you bid at a tax sale. First of all you need to pay in full with cash or certified check for anything that you are the successful bidder on. Some municipalities will accept attorney\'s checks and/or money wires, but most tax collectors will only accept cash or certified funds payable to the municipality. Some tax collectors will allow you time to go to the bank after the sale to get a certified check, but some will not. You will need to know ahead of time if you will have to pay immediately after the sale or if you will be given time to go to the bank. If you won\'t be able to go to the bank after the sale, you will need to have the required funds with you. Do not wait until the day of the sale to learn what forms of payment are accepted, or you could loose a successful bid.

Get in touch with the tax collector a few days before the sale to verify the time and place of the sale, find out what forms of payment are accepted, and whether or not you need to register ahead of time. Keep in mind that in most cases, half of the properties that are on the original list for the sale will be paid off and no longer available. You don\'t want to waist your time doing due diligence on all of the properties on the original list. The tax collector should be able to give you an updated list with the current properties in the sale. In many cases the tax collector will fax you the list. A few municipalities will have their lists on their website. For very large municipalities you may have to go pick the list up at the tax collector\'s office. Once you have an updated list, you\'ll need a day or so to do due diligence on the properties. Even though you are not buying the property, you want to make sure that you\'re not buying a tax lien certificate on a worthless property.

So how do you know how much money to bring, since you don\'t know if you\'ll be the successful bidder on the properties that you want to bid on, or how much premium, if any, you will have to pay? We have our own proprietary software program that generates a bidding form to tell our bidders which properties to bid on and how much they can pay for them. You can put together your own form with this information to have in front of you at the sale. If you\'re bidding in a state that goes into premium, you\'ll need to calculate just how much premium you should pay for the properties that you\'re going to bid on. The software program that I use, Tax Lien Manager from DataVentures I LLC, does this as well as tracking all my liens.

If you are the successful bidder on any of the properties, you will be required to give the tax collector a Tax Sale Bidder Information Sheet. Some tax collectors will require that you hand in the form before the sale, when you register. It has to be filled out with your name, address, and social security number or federal ID number if you\'re bidding under a company name. It may also have a required notice and disclaimer that you have to sign. Usually there\'s room to fill in the lot and block numbers of the properties that you win, along with the % bid (0 if you paid premium), premium, if any, and the amount of sale (this is the amount of the lien and could be different than the total amount paid if you paid premium). Some municipalities also require you to fill out a W-9 form, so be prepared with your business information if you\'re bidding under a company name, or with your social security number if you\'re bidding under your own name.

On the day of the sale, arrive early so that you can check on last minute updates (people are always paying their taxes last minute, right before the sale), open taxes, and zoning if you need to. I like to arrive an hour before the sale begins. You\'ll need to have the Bidding Form, certified checks, and the Bidder Information Sheet. Make sure that you\'re seated and ready a few minutes before the sale begins. Turn off your cell phone - once things start everything happens very quickly and any distraction can cost you.

After the sale you will have to pay for any liens that you purchased. If the tax collector doesn\'t have change, they will send you a check for the difference, but you may have to wait until the next meeting of the municipality\'s board of trustees before you get it. Keep your receipts and a copy of the bidder information sheet. In some cases the tax collector will issue a certificate immediately, but in most cases you will have to wait up to 10 days and the certificate will be mailed to you.

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Joanne Musa works with investors who want to reap the rewards of tax lien and tax deed investing. She is the author of the Tax Lien Lady\'s E-books, Tax Lien Investing Secrets and Tax Lien Lady\'s State Guide to Tax Lien and Tax Deed Investing. You can find out more about Tax Lien Lady\'s E-books at http://www.taxlienconsulting.com/sales/sales.htm. For more about tax lien investing e-mail MoreTips@taxlienconsulting.com. If you\'re interested in finding out more about DVI\'s Tax Lien Manager software, send an e-mail to software@taxlienconsulting.com