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Real Estate For Pennies On The

Dollar

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By Steve Maletos

Copyright 2002 by Steve Maletos. All rights reserved. This publication may not be reproduced in any form without the express, written

permission of the copyright owner.

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TABLE OF CONTENTS _____________________

INTRODUCTION

Welcome! ............................................................................................... 1

Section 1: Property Tax Basics ............................................................ 4

Section 2: A Tax Lien Opportunity..................................................... 6

Section 3: Common Reasons for a Tax Sale Opportunity ................ 8

What Did We Learn Here? .................................................................. 15

BOOK ONE: Your Tax Profit Encyclopedia

Chapter One: Basic Terms................................................................... 2

Chapter Two: The Tax Sale Report Card.......................................... 14

Section 1: Public Oral Bid Foreclosure or Deed Tax Sale....... 16

Section 2: Public Oral Bid Auction Tax Sale ............................ 25

Section 3: Public Oral Bid Tax Certificate Sale ....................... 31

Section 4: Buying Tax Certificates Direct ................................. 47 Chapter Three: The Recap .................................................................. 57

So Now What? ....................................................................................... 64

BOOK TWO: Making Your New Knowledge Pay Off

Chapter One: The Dream Sale ............................................................ 2

Chapter Two: The Point Property ................................................... 6

Chapter Three: The Procedure ........................................................... 9

Chapter Four: The Procedure Some No Nos .................................. 19

Chapter Five: The Procedure Rule of the Pan................................ 27

Chapter Six: The Payoff....................................................................... 33

Secret 1: Rural Sales ........................................................................ 34

Secret 2: Tax Certificates in Low Interest States.......................... 35

Secret 3: Locating Less Likely Tax Certificates............................ 36

Secret 4: Friendly Local Contacts .................................................. 44

Chapter Seven: A Brief Summary ...................................................... 46

CONCLUSION: Quick Reference & Final Thoughts

Section One: Quick-Reference Guide The Basics........................... 2

Section Two: Quick-Reference Guide How To ............................... 9

Section Three: Quick-Reference Guide Steves Secrets................. 24

Section Four: The Final Word............................................................. 27

YOUR TOOLKIT: The Tools You Need To Get Going

Insider Tax Lien Links ......................................................................... 2

State by State Contact Information .................................................... 11

Section 1: Public Oral Bid Foreclosure States .............................. 13

Section 2: Public Oral Bid Auction States .................................... 25

Section 3: Public Oral Bid Tax Certificate States ........................ 29

Section 4: Buying Direct Tax Sale States ...................................... 48

Section 5: All Other States ............................................................. 49

Tax Certificate States Chart ............................................................... 57

Sample Contact Letters ........................................................................ 60

Sample Tax Certificate(s)..................................................................... 65

WELCOME To Real Estate For Pennies On The Dollar, the worlds most

straightforward, plain talking, step-by-step program designed to help you

make money in real estate. There are other complicated programs and

systems out there, but none of them lay out what you need to know, and

then exactly what to do with that knowledge to turn it into profit. I wanted

to tell you my insider secrets in a way that anyone can understand, so I

came up with this approach.

Because you purchased my program, Im willing to bet that you are right

where I was:

Hearing about all those people making millions in real estate, but having no idea how to get started (after all, they must be experts at

investing or something, right?)

Wishing I had a way to make serious money without huge risks, or taking years of college classes, or special training

Wanting a better life that wasnt the daily grind of living paycheck to paycheck, embarrassed that I cant afford to go out for dinner with

my friends or that my car is a piece of junk

Thats whats so amazing about the opportunities that real estate and

more specifically, the tax sale part of real estate investments can

deliver.

You DONT have to be a trained expert. You DONT have to take reckless

risks. And you DONT have to be satisfied with your current income and

lifestyle!

Im just a regular guy like you, and I turned my professional and personal

life around using the ideas that Im about to share with youso you know

it works! And like I said, I cut through all the noise thats out there to bring

you exactly what you need to know to succeed. No more, no less.

Listen, you can find tax law listings all over the Internetand thats what

some people sell as a get-rich-quick real estate program! But Im going to

tell you how to act on whats just waiting out there for you. Here in Real

Estate For Pennies On The Dollar, I use examples of real-world

situations so you can really see how things can come together to your

advantage.

So lets get you started down this exciting new road

SECTION 1

Property Tax Basics

First, you need to know a little bit about how your new opportunity in real

estate arises in the first place.

Way back when, when creating counties and towns, local governments

needed a way to raise money for common services, such public schools,

police and firemen, etc. They figured that the local landowners should be

taxed based on the value of their properties, figuring those who could

afford the more valuable land could probably afford to pay relatively

higher taxes.

BUT WAIT! Although today thats true much of the time, there are

situations when that may not be true at all

One of the key things to keep in mind here is that land is appraised these

days at whats called its highest and best use which means not what the

land is worth to the current owner, but what it could be used forsuch as a

shopping mall or more lucrative undertaking. Farmland is not worth nearly

as much as a housing development for instance, especially as the

population of the world expands and more and more people need a place to

live. Its those discrepancies in value that can run landowners into a

problem.

EXAMPLE:

A nice little family has owned an old farm on what was the

edge of town for 50 years, but the town has expanded over

time and now the farm is surrounded by shopping malls. The

property taxes (based on the constantly increasing appraised

value) have been going up at a rate thats more than the family

has been able to afford. So now the county is owed back

property taxes on that land, and if they arent paid, the

property will be headed toward foreclosure.

Now, what happens to that family that cant pay the taxes on

the property? The local government has the legal right to

collect those taxes in any way they can. This generally means

that the local government sells the land through a tax sale

(this will be discussed in more depth later). The situation is

pretty simple the family can either pay the tax lien thats due

on their farm, or give up the rights to that land and risk losing

it during the tax sale process (either to the government, or to a

tax lien investor).

As you read on in this book, youll learn that by putting yourself between

the landowner and the government agency that holds the tax lien, you will

be exactly where you need to be to potentially turn a big profit. But here I

wanted to give you the short version of property tax basics so you start to

understand how your opportunities will arise.

SECTION 2

A Tax Lien Opportunity A Quick Overview

Now let me give you a short version of the logistics of a tax lien

opportunity, and where your role can be:

A Tax Lien Opportunity

1. You find a property that has back taxes owed on it

2. You purchase (for a tiny fraction of the value of the property) the tax lien

from the government agency that owns it because they dont want to deal

with waiting around to collect their money

3. Now one of two things will happen:

A. the owner defaults on the taxes and the property is in foreclosure,

which means the property is now owned byYOU!

- You can turn around and sell it for way less than market value

and turn a nice fat profit, or potentially sell it at or above market

and really cash in!

B. OR, the owner pays the taxes owed, plus interest, toYOU!

- Now youve made money (the interest) on your investment,

usually at a significantly better rate than if you put the same

amount in the stock market or with any other supposedly money-

making investment!

You can take control of a property and make money EITHER WAY! The

investment is secured by the property, so its solid as a rock.

Now see why tax liens are such a great opportunity???

SECTION 3

Common Reasons That A Tax Sale Opportunity

Becomes An Opportunity For You

I showed you one example of how a tax sale event may arise. But for you

to really take advantage of these situations, you need to know why these

sales happen. And at the same time, its obvious that most landowners

wouldnt lose their highly valuable property for a few hundred dollars in

back taxes. Wouldnt anyone see that they could sell their land to cover at

least that themselves, or find any number of other ways of just plain losing

their entire property to the county government?

Yes, but there are more reasons that you might think:

DEATH

Suppose an elderly owner passes away, with no heirs or relatives. The

property just sits there, accruing back taxes, until the government puts it up

for a tax sale.

NO LEGAL OWNER

Here, the elderly owner who passes away may have some relatives out

there, but maybe they died suddenly, and never having specified a new

owner to take over the legal ownership. Its really up to the owner to make

sure that the local governments are up to speed on who really owns the

property, so if they fail at maintaining the piece of information, the

property can fall into a tax sale situation.

INCAPACITY

Sometimes a property owner might contract a serious physical or mental

illness, and when the property taxes are not taken care of by someone else,

they may have to be collected by the government through a tax sale.

TAXPAYER ERRORS

This is one of the least pleasant situations, but also one of the most

common, particularly in the case of elderly couples. Say Mr. Jones has

been in charge of all the bill paying, and he dies, leaving Mrs. Jones to fend

for herself. She may not realize that there are taxes due on their property, or

just plain forget to pay the bills. Or maybe she simply moves to a

retirement home, forgetting to keep up to date on the taxes (this happens

most often when the house is owned free and clear). No payment on

property taxes means a tax sale event. This isnt something one hopes for,

but it happens a lot more than it should.

BANKRUPTCIES

More often than not, opportunities for real estate tax sale investors that

happen because of bankruptcies involve corporate ownership of some sort.

A company might own a parcel of land, but dissolve without closing out all

their assets, leaving the property in question without fully-paid taxes. Not

many successful businesses will forget about truly valuable properties, but

as you probably know, there are often business deals done under the table

or without all the partners knowledge, and those can be a terrific

opportunity for the investor.

JUST PLAIN FORGOTTEN

This category would probably be the one that most tax sale investors like

yourself hope to find. Its the situation where the purchaser has moved, or

has changed his lifestyle, or divorced, or something to where he just plain

forgot about the property. Theres nothing like a mid-life crisis to distract

people from paying their bills. Or maybe the property has been handed

down so many generations that its value, and even very existence, is

forgottenout of sight, out of mind.

FORCED TO FORGET

So you bought a piece of property for a hunting club for your buddies. The

perfect hideout for just the boys. Maybe before you can figure out how to

tell your wife, your marriage gets a little strained and you realize the

hunting club idea is going to be the last straw. You just wish everything,

including the property, would disappear. Or, they might have purchased a

piece of land as a surprise for their spouse to build a dream vacation home,

but suddenly find themselves getting divorced and now have to let the

property disappear or lose it in the nasty negotiations. Well, if you dont

pay the taxes due, it will likely be sold by the government or a savvy tax

sale investor.

MISTAKEN PAYMENTS

This is when the landowner is trying to do the right thing by paying their

taxes, but somehow sends payment to the wrong tax authority. Maybe the

owner sends payment to the IRS instead of the right local agency, but is

credited by the IRS against their personal taxes due to confusion. Imagine

if this happens for 20 years (and the landowner doesnt even wonder why

his personal taxes are so low all the time). The owner thought they were

paying one kind of tax, the government another, and the landowner finds

himself in a tax sale situation. Or suppose the owner thought his accountant

was covering his taxes, but the accountant was thrown in jail years before

and hasnt paid a dime. Again, it would be unusual for a mistaken payment

to result in a lost property, but there have been cases where exactly that has

happened.

MISTAKES BY THE TAX AUTHORITIES

Yes, local governments have been known to make paperwork errorsnot

too hard to believe! They might accidentally misfile payments or related

information to a property, resulting in a tax sale event. Its somewhat

unusual for this to go all the way to the point where the property is lost by

the original owner, but in combination with a forgotten property or one less

important to the owner, it can and does happen on occasion.

WRONG ADDRESS

As a landowner, this is good motivation for making sure the post office

knows your current mailing address. It might be as simple as forgetting to

pay the property taxes because you forgot to have the bills forwarded to

your new home in Eastern Peru. After awhile, your property goes up for

sale and you dont even know about the proceedings. Yes, the government

is legally bound to work hard to find you before they foreclose on your

property, but nonetheless this can and does happen.

TAX DODGERS

As we all know, there are those who protest the governments right to tax

them to begin with. Maybe they inherited a huge house in a beautiful part

of town, but dont think they should pay any kind of taxes and are

eventually arrested for income tax delinquency. Chances are good the

property taxes are delinquent too, so that nice house is now up for grabs.

A WORD OF CAUTION

Dont forget things that are too good to be true sometimes are. The

question of why someone didnt pay their property taxes does make a

difference, and will stand up in court. The simple situation of mis-

addressed payments is not going to force someone out of their home if they

can prove in court that they had good faith in trying to make payments.

Yes, all of the causes I described above can result in a tax sale event, but

the right combinations need to come together or you as the real estate

investor wont see the profits you expected.

Later in this book Ill tell you about more things to be cautious about, and

really the key to success here is doing all the necessary due diligence.

Theres just no shortcut to doing your homework and making sure that

youre not getting greedy and ignoring facts.

WHAT DID WE LEARN HERE?

So, what weve learned here is a little history of the property tax policies

that this country employs, and how those policies can sometimes result in a

tax sale event. Its important to understand these things so you can take full

advantage of the opportunities as they arise.

In Book One, youre going to learn some of the basic terminology that

youll need to know as a successful real estate investor

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-BOOK ONE-

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YOUR TAX PROFIT

ENCYCLOPEDIA!

A Plain English Guide to Amazing Real Estate Profits

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The first step to making outrageous profits for pennies on the dollar is

knowing the lingo. Tax lawyers and real estate wonks have created a

private maze of confusing terms and ten-dollar verbiage to keep money-

making opportunities out of the hands of normal folks like you and me.

So Ive put together a small survival kit - everything you need to know

about the real estate tax world in plain English

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CHAPTER 1:

THE BASIC TERMS

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Other courses pretending to offer a straight-talking take on real estate tax

matters often leave you feeling like a traveler in an open-air market in the

depths of a foreign country without even a basic understanding of the

language. Deals are going on all around you, and these people are certainly

excited and talking about something!

Unfortunately, theres no English in your dictionary it claims to be a

guide, but its written in a language impossible to understand. You dont

even know how to ask the guy in the kiosk over there for a guava, let alone

find out from him what the assessed value of his property is according to

the county assessor!

Never fear. This course is written in plain English for plain speakers.

Before we even go into all of the tax stuff, heres a down and dirty

explanation of a few terms that will be important later on down the road

that ends in the land of huge profits.

LIEN A lien is just a fancy way of saying, you owe me money, and you havent

paid me, so I am placing a claim on your property. A tax lien is just one

type of lien, usually placed on a piece of property by the state or local

government after nonpayment of property taxes.

The IRS can place a lien on your assets if you dont pay your income taxes.

A contractor can place a mechanics lien on your property if he or she

does some work on the premises (for example installing a new shower in

the guestroom downstairs), and then is not paid. If any of these liens

persist in being not paid, whoever (local government, Federal government,

shower guy) placed the lien on the property will eventually HAVE

CONTROL OVER THE PROPERTY TO DISPOSE OF AS THEY WISH.

Now, the shower guy might want your house, but the local government has

better things to do with its time. Usually, they just want the value of the

property taxes owed on the property. And thats where we come in. The

local government still isnt going to get their property taxes from owning a

real property, so it will possibly choose selling its claim on the property to

some savvy investor.

Heres the thing, though: the local government still only wants its property

taxes, so its possible theyll start the bidding for the real property at the

amount of the taxes, which could only two or three percent of the value of

the property! This conceivably gives you the opportunity to grab a

$100,000 home for only $3,000! Thats a good days work, I think youll

agree.

EXAMPLE: Remember the old family farm from the introduction? Lets

say its somewhere in Ohio outside Cincinnati. The farm had

been in the family for generations, and had been modestly

successful successful enough to keep the house in good

repair and to buy a new tractor. However, over the past few

years, other farmers in the area sold out to shopping malls, and

the assessed land value in the area skyrocketed.

Now young Mr. and Mrs. Tarlow, who own the farm, dont

have to drive twenty miles into town to rent a movie!

Unfortunately, the value of their farm is no longer being

assessed as farmland. Since the surrounding parcels are malls

and condominiums, the county appraises the Jones farm as if

it were being used for malls and condominiums!

This system, called highest and best use, is excellent for the

Joneses if they want to sell their land and move to a new

condo in Cincy, but they decide to continue to work the farm.

But, over the years, they cant pay the ballooning property

taxes on the place, so the local government, which has the

legal right to collect those taxes in any way they can, places a

lien on the property in the amount of those back taxes.

So, due to the fact that the farm owners havent yet paid their

back taxes, the local government now has a completely

legitimate claim over their property, and can dispose of that

claim in any way they see fit. That disposal will probably take

the form of a tax sale!

FORECLOSURE

I go into everything you might want to know about all sorts of foreclosures

in my companion volume, Fast Cash in Foreclosures [LINK TO SITE],

but at its heart a foreclosure is a turning point, and an opportunity. Most

folks dont have $100,000 lying around to spend on a property. So, they go

to a bank or other investor for a loan, which is secured by a mortgage on

the property. The mortgage is paid back in installments, with interest,

which is the reason the investor in interested in giving the loan in the first

place.

However, if for some reason, the party paying on the mortgage is no longer

able to live up to their responsibilities, the investor can foreclose on the

property. Similarly, some local or state governments will foreclose on a

property for nonpayment of delinquent property taxes. If a government or

bank or investor forecloses on a property, it takes control of the propertys

destiny, and can then proceed to do whatever it wants with the house or

parcel of land.

For example, possibly sell it AT A GIGANTICALLY REDUCED RATE

at a tax sale, which is an opportunity for you or me to make huge profits for

pennies on the dollar! Heres another example:

EXAMPLE: Ted Furlow, a district attorney in Kansas, buys a piece of

property out at the lake to build a summer cabin. Before he

builds, however, Ted has a moment of clarity, decides to join

the Peace Corps, and travels to Africa, where he passes away

in a freak rhino accident. A young man, he left the country

without preparing a comprehensive will, and the piece of

property he bought for the cabin lies unclaimed, as his

relatives dont even know it exists.

Over the years, the government doesnt receive any payments

for property taxes, and eventually forecloses on the property.

The state then sells the property at a tax sale, where the

opening bid will be, basically, the back real estate taxes an

opportunity to make a huge profit!

TAX SALE

A tax sale is generally a public event where investors buy, depending on

the state, tax deeds essentially deeds to real property or tax

certificates essentially pieces of paper that represent the tax lien, or debt,

a property owner owes in delinquent real property taxes.

Whatever the type of tax sale, it offers you the opportunity to make

FANTASTIC PROFITS for a TINY INVESTMENT at LITTLE OR NO

RISK! Generally, a tax sale for a county is held once a year. Some states

require all their counties to hold their sales on the same date.

EXAMPLE: Every year in February you fly down to Sedona, Arizona to

attend the local tax certificate sale, as the state requires each

county in Arizona to hold its tax sales in February. By the

way, you also write off this sunny trip in the winter each year.

Doing business at a tax sale is, of course, tax deductible. You

always get there early to research the properties in question,

and to get in a few extra rounds of golf!

At the tax sale itself, you bid on certificates for likely

properties you have located, purchasing some, and giving

yourself the chance to make fantastic profits for a tiny

investment at little or no risk!

EQUITY

I can easily define equity as the difference between the sales price of a

property you are buying and any debts (for example, a mortgage) you owe

on it. People refer to equity variously in either relation to dollars: $20,000

equity in that parcel of land, or as a percentage: 20% equity in that parcel

of land. Tax deed sales and tax certificate sale can sometimes offer

amazing opportunities for acquiring HUGE equity stakes for TINY initial

investments.

EXAMPLE: Rhonda Wayans and Lars Mushkin are in love in Washington,

D.C. Theyre going to get married next year, but cant wait

that long to live together and Rhondas landlord is selling the

Craftsman house that she rents. They both love the house, and

after some serious soul-searching (and checking account

searching) they decide to buy the place.

They put down $30,000 cobbled together from his inheritance

and her internet stocks, and they take out a mortgage for the

other $70,000 of the $100,000 house. They now have 30%

($30,000 divided by $100,000) equity in the house.

But love is fleetingRhonda spends fourteen hours a day on

the net, and Lars has this incredibly loud and annoying laugh.

To make a long story short, they decide NOT to get married,

and cant figure out what to do with the house. Theyre not

able to sell it, Lars disappears and Rhonda rents out the place

to somebody else. The money from the rent just covers the

mortgage, so Rhonda sets up an automatic payment to the

bank, and then leaves the material world, joining a Buddhist

monastery in Tibet.

The mortgage is paid, but, oops! the property taxes arent.

The state government cant find Rhonda or Lars, and they

eventually place a lien on the property.

You are at the next annual District of Columbia tax certificate

sale, and you swoop in to purchase a claim to this $100,000

Craftsman for the price of the unpaid property taxes, a mere

$5,000. If Rhonda and Lars dont show up soon to pay you

back at a significant interest rate, you now have 95% EQUITY

in the house! Nice going.

RIGHT OF REDEMPTION

To redeem something is to buy it back. In plain and simple language, if

you buy a used car from me, and then I realized it would be a great gift for

a relative, its possible you might let me buy it back, or redeem it. You

might or you might not. Its your choice. In the world of real estate tax

law, theres a term floating around called a right of redemption. In some

states, after you buy a tax lien, the previous owner has a period of time,

established by state law, when they can buy back the lien to the property

from you, for the price you paid for it, plus quite a bit extra!

EXAMPLE: In Baltimore, Crabcorp went bankrupt. This company running

an excellent restaurant had dreams of expansion, but had a run

of really bad luck, and went under.

All of their assets were dealt with, but interestingly, one of the

partners, Danny Torp, had bought a piece of property down by

the water with the companys money, intending to create

another, fast food version of Crabcorp. He never told his

partners about it, and when the company went bankrupt, the

property taxes went delinquent over time, as nobody knew

about the property. Its a beautiful stretch of land, and you

end up getting possession of it at a tax sale.

However, the partners of the newly rejuvenated Crabcorp find

out that their ex-partner, Danny Torp, had purchased this

amazing property, and they decide to exercise their right of

redemption (in Maryland they have between 2 and 6 months)

to buy back their property.

So, that means they owe you the price of the tax lien, PLUS

24% INTEREST! So you dont get the property, but you do

get an absolutely astonishing return on your investment!

DUE DILIGENCE

There are a huge amount of good opportunities out there in the world of tax

liens, but I can help you find the great ones! But I wont lie to you. The

difference between making an okay living and a dream life of huge profits

is essentially some solid research, or what the lawyers call doing your due

diligence.

Essentially what I mean when I use this term is doing your homework, or

eating your vegetables. Having a good meal when you were thirteen was

about that amazing hamburger, but your mom made you eat the spinach,

too, because it was good for you. If you take just a little bit of time to sort

the good properties from the bad, youre on your way to huge profits at

little or no risk!

Dictionaries define it as the care that a reasonable person exercises under

the circumstances to avoid harm to other persons or their property. I

define it as knowing your area, knowing the local customs, and figuring out

the properties youre interested in ahead of time. Well go into further

detail in the next chapter.

EXAMPLE: You go to a tax sale in Oklahoma, and two properties are up

on the block. Theyre one street apart from each other, and

each assessed at $50,000, and you can buy the lien to either

for around $2,000. So whats the problem! Why not buy both

liens, right?

Wrong. Since you drove by the sites and did your due

diligence, you know that one property, 38 West 1st Street, is

an excellent choice. The other property, 38 West 2nd Street, is

an abandoned lot that residents have decorated with

abandoned cars, appliances, and gasoline or heating oil or

other toxic elements you can only begin to imagine. Besides

paying someone to remove all that stuff from the property,

youre also dealing with a possible environmental clean-up

problem!

So what do you do? You buy the tax lien for the 1st Street

property, and let some other person who didnt do their

homework deal with the problems of 2nd Street!

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CHAPTER 2:

THE TAX SALE REPORT CARD

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The terms you just learned are pretty straightforward, huh? But whats the

difference between those examples above in Ohio, Kansas and D.C.? How

do you know the difference between a public oral bid foreclosure auction

and a public oral bid auction with right of redemption? There seems like so

much to figure out!

After sorting through the mumbo-jumbo, there are FOUR categories that

pretty much cover all the tax sales you might encounter. Ive summed each

of them up in an uncomplicated way with numerous examples, pros and

cons, AND Ive rated each of the categories with a letter grade!

All tax sales are not created equal, and this guide will help you find the

truly fantastic bargains out there, as opposed to just the good ones.

Just read each section for a description of the different sales as well as real-

world examples

SECTION 1

Public Oral Bid Foreclosure Auction or Deed Tax Sale Arkansas, California, Florida, Idaho, Kansas, Nevada, New Mexico, New

York (in some cases), North Carolina, Ohio (in some cases), Pennsylvania,

Utah, Virginia and Washington.

In states that use this particular system, after the local government places a

tax lien on delinquent real property taxes (were using our lingo now), the

lien is foreclosed, and the local government actually sells title to the

property at a tax sale.

In other words, the owner didnt pay their property taxes, so the

government took the property so it can acquire the money owed in back

taxes by selling the property.

Every year, a county in one of these states will usually hold its own public

oral bid foreclosure auction sale.

Thats a lot of language for a pretty simple thing, if you break it down:

Public Everyone who wants to come is invited. Wow! Thats a lot of people,

right? Not necessarily. Depending on how well the county advertises the

sale, its very possible that just a few people or YOU ALONE might be

present!

Oral Everyone present bids on a specific property until no one tops the final bid.

The process takes place out loud.

Bid If you offer one price, someone else at the auction has the chance to better

your offer. This is why sparsely attended tax sales are so great. The fewer

the people, the smaller the competition, the greater the reward!

Foreclosure The properties on sale will be property with a tax lien foreclosed upon a

certain period before the date of the sale.

Auction Sale The local government is actually selling valuable properties at rates starting

in many states at the cost of the delinquent taxes and fees alone!

Needless to say, this type of tax deed sale provides you, the well-informed

and savvy investor, tremendous profit opportunities!

Some things to expect at a typical foreclosure auction tax sale:

Low Opening Bid:

The opening bid at one of these sales is usually only the prorated

cost of the conducting the sale (i.e., staff time, paperwork, etc.), the

back delinquent taxes, any other costs connected to those taxes.

Small change compared to the value of some of these properties.

First Lien:

Property tax liens, under many state laws, are called the first lien.

Real property taxes are generally considered senior to any other lien

placed on a property, from a lender lien like a mortgage, to a federal

tax lien, to the mechanics lien that shower guy placed on the

property for the work he did in the downstairs bathroom.

Its important to note, by the way, that all state tax laws are not

created equal, and, as the smart investor you are, you should check

on the seniority (or priority) of property tax liens as part of your

research before you buy. Know local real estate law before making

any permanent commitments!

Great Equity Opportunities:

If the state regards a property tax lien as the first lien, as illustrated

above, that means that its the heavyweight of the field, and it has

priority. Imagine that all of the liens against a house (property tax,

mortgage, judgment liens from a court) live inside the house. But

Big Lou the Property Tax Lien, is the first lien, the priority, and the

county forecloses on him.

If an investor buys Big Lou the Tax Lien, not only does the investor

get the house, but ALL OF THE OTHER LIENS are thrown out of

the house. All of those secondary liens, even a mortgage from a

lender, are discharged and no longer viable.

If all the other liens are off the board that means you just purchased a

$50,000 property for the price of a year or twos delinquent taxes

and fees, typically under 5% of the value of the property. So,

conceivably, YOU PAID UNDER $2,500 FOR 95% EQUITY ON

THE PROPERTY!

EXAMPLE: Youre at an annual tax deed foreclosure sale in a county in

Nevada, called in that state a trustee sale. Youve done your

due diligence, and you know that Nevada thinks of property

tax liens as essentially first liens. The state gives them

priority over all mortgages, deeds of trust, judgment liens,

shower guy liens or any other lien you can think of, creating

the opportunity of acquiring a property free and clear of any

other debts it may have gathered over time.

One of the properties up for auction is a sweet little bungalow

in Las Vegas once owned by Fish-Eyes Cantini, a minor

functionary of the Cantini crime family who disappeared

under mysterious circumstances a few years ago. Its a

beautiful little place, lovely spot, a real vacation hideaway,

assessed at about $120,000.

In any case, the property taxes havent been paid. Two years

ago the county tax receiver, according to state law, published a

notice once a week for four consecutive weeks in the

newspaper stating all of Cantinis vital statistics, a description

of the property on which the taxes are a lien, and the amount

due plus penalties and costs. Nobody showed up to pay that

amount, Cantini being, as previously mentioned, mysteriously

missing.

The tax receiver now issues to the county treasurer a

certificate telling the treasurer to hold the property for two

years, just in case Cantini reappears and wants to pay the back

taxes and costs, getting his property back. Nobody shows.

Fish-Eyes is obviously sleeping with the fishes. Two years

later, the period allowed for Cantini to redeem of the property

has expired, so the tax receiver executes a deed to the property

to the treasurer, who then is directed to sell the bungalow.

So, the sale is posted in three different public places in the

county. The required twenty days after that, no one with any

legal connection to the bungalow has come forward to redeem

the property, and the sale commences. You now know that

under Nevada law, nobody previously connected with the

property can redeem it after the sale!

This is where you come in. Youve done your due diligence,

identified this property as a hot prospect, and you go to the

sale. One other person is there, Not-So-Smart Jimmy, who

you sometimes see at tax sales. The treasurer opens the

bidding at the AMOUNT OF TAXES, COSTS, PENALTIES

AND INTEREST from the delinquent property taxes, in this

case around $2,000!

You open the bidding at $2,000, but Not-So-Smart Jimmy

quickly responds with a bid of his own, but he hasnt done his

homework and he doesnt know what a sweet deal this is. He

eventually drops out and you pay $3,500 and leave the

treasurers office with a deed to the property!

So due to your mastery of this system, you are now the owner

of an excellent vacation house in Vegas to sell at a huge profit,

or rent to tenants for essentially free money! And how much

did you for it? The price of a moderately decent used car!

What happened in the fictitious EXAMPLE above is obviously a best-case

scenario. I want to make sure you understand that every tax deed sale you

go to will not be like this. However, if you do your homework and

familiarize yourself with local real estate rules and this straightforward

system, you are putting yourself in a position to make acquisitions and

profits very similar to this one!

PUBLIC ORAL BID FORECLOSURE AUCTION (TAX DEED SALE)

PROS & CONS

PROS

Low Opening Bid.

Usually the cost of the back taxes, plus administrative costs and

penalties!

First Lien.

Many states consider property tax liens as priority to all other liens, wiping

out any secondary ones!

Great Equity

A first lien may mean gigantic profits and huge equity for pennies on

the dollar!

Free and Clear.

Generally, once you have the deed in your hand, its yours. No

messy contact or litigation from previous owners.

CONS Competition

The fact that the state holds an oral bid auction (i.e., in public) means

others attending the tax sale might want the same properties youre

looking at, possibly driving up the bid.

SUMMARY Tax Deed Sales are a great way to make giant profits on miniscule

investments at little or no risk! Seek out sales with little or no other

attendance to reduce the chance of competitor investors driving up the

price.

STEVES FINAL GRADE: A-

SECTION 2

Public Oral Bid Auction Tax Sale Alaska, Maine, Oregon, Minnesota, Wisconsin, plus some improved

properties in New Mexico and New York.

Be careful! Do your due diligence! These states can do things quite a bit

differently than the states above, and your ability to make fantastic profits

from tax lien sales will be squeezed!

To find out why, lets break down the language again.

Public Ok, so its a public auction, just like we established before. Anyone who

wants to be there can be there. You know by now to try to find sales that

are less populated.

Oral Everything is done out loud, check.

Bid If you offer one price, someone else at the auction has the chance to better

your offer. Right, you remember this, too.

Foreclosure NOPE! Ah ha! While the tax liens on property are foreclosed upon by the

state, the opening bid at the auction is most often NOT merely the cost of

delinquent back taxes and penalties and administrative fees on the property.

The opening bid is often A MUCH HIGHER PERCENTAGE OF THE

ASSESSED VALUE OF THE PROPERTY, LIMITING YOUR ABILITY

TO MAKE FANTASTIC PROFITS ON TAX LIENS!

So far, Ive showed you that in many states that operate tax deed

foreclosure sales, the county or other local government will place a tax lien

on a property, essentially getting title to the property through foreclosure.

Then, at a tax sale, in order to get the proceeds from the property tax owed

to it, the county sells the lien, and in effect the property, to investors. The

opening bid will most likely be the tiny percentage of the assessed property

value that is the delinquent property taxes plus administrative costs and

other penalties. As Ive shown you above, this creates an opportunity for

you to make and incredible profit for minimal risk!

ON THE OTHER HAND, some states allow their counties to set opening

bids at a much higher level than the delinquent back taxes plus costs. Its

possible you might even attend a tax sale where the opening bid is set near

the actual value of the property. This practice can severely curtail your

ability to make outrageous profits at little or no risk!

EXAMPLE: Youre in Duluth, Minnesota to help your mother move. The

process takes a while, and you come across news that the

county is having a tax sale while youll be in town! The local

statutory review period of ninety days after the forfeiture of

the properties is ending next Tuesday, after which there will

be a sale. What luck!

You do some research and some due diligence, and youre

very excited about your prospects. Youve located a couple of

excellent properties that will be going on sale, including one

amazing house that has been abandoned for some time, but is

still in really excellent shape. Its assessed at about $200,000.

The day of the tax sale arrives, and youve prepared yourself

to bid on the properties. From your experience at other tax

sales you assume that the bidding will start at the delinquent

property taxes plus costs, a tiny fraction of the true value of

the properties. Youre prepared to bid up from that starting

point, even to around $10,000 for the lien on the amazing

house.

The county auditor opens up the bidding with the amazing

house, declaring an opening bid of $195,000! What? How

are you supposed to make amazing profits with little or no risk

at this tax sale if the bidding starts very near the actual value

of the property? Well, you did excellent homework on the

properties themselves, but you didnt look into local real estate

tax law, which provides that during the tax sale the county

auditor shall sell the various parcels of land to the highest

bidder, BUT NOT FOR A LESS SUM THAN THE

APPRAISED VALUE.

Appraised value of real property means the market value

of the property, which is essentially the going rate during a

private sale of a similar property.

You help your mom move and get out of Minnesota quickly,

off to state where they have better opportunities to make

something out of the deal.

PUBLIC ORAL BID AUCTION REPORT

(ADJUSTABLE OPENING BID)

PROS AND CONS

PROS

First Lien.

Many states consider property tax liens as priority to all other liens, wiping

out any secondary ones!

Free and Clear.

Generally, once you have the deed in your hand, its yours. No messy

contact or litigation from previous owners.

OK Equity.

A first lien can still mean big profits and great equity, as you are acquiring

the property with all other liens discharged!

CONS

Competition.

You still run the risk of competitive investors driving the price of the

property up.

Higher Opening Bid.

Not usually the cost of the back taxes, plus administrative costs and

penalties! Generally these state offer their counties the ability to set

opening bids at higher or much higher levels.

SUMMARY Opportunities for savvy investors can still be located, but due to the

generally higher opening bid price, are less likely to secure huge profits

with little or no risk to yourself. Sales with little or no other attendance are

still your best opportunity to reduce the chance of competitor investors

driving up the price even more. Better opportunities can usually be found

elsewhere!

STEVES FINAL GRADE: C-

SECTION 3

Public Oral Bid Tax Certificate Tax Sale Essentially; Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa,

Kentucky, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska,

New Jersey, North Dakota, Oklahoma, South Carolina, South Dakota,

Vermont, and Wyoming. California, New Hampshire, Ohio, and New York

allow tax certificate sales, but theyre not universal.

Now that Ive established which states use this particular system, let me tell

you what these things are:

Real estate experts around the country have been buying tax certificates for

years, using these little known secret gems to gain outrageous returns on

their investments. Why should they have all the fun? Its not rocket

science. Its not brain surgery. All it requires is a little research, good

judgment, and the knowledge Im teaching you right now through this

eBook!

A TAX CERTIFICATE is evidence, or a license if you want to look at it

that way, showing that the investor has purchased a tax lien. Remember

that a tax lien is a claim placed on a real estate property by a local

government due to the owner not paying delinquent taxes.

So a tax certificate is proof that you, the investor, have paid the local

government any outstanding property taxes on a specific piece of real

estate. In exchange for that payment, the property owner now has to pay

you the amount of the delinquent taxes, plus a sometimes extremely

lucrative interest rate, within a certain period established by the local

government. Essentially, you have bought what can be an incredibly high

interest loan from the local government! If you only receive the

redemption payment, youve already made an excellent profit.

Let me make one thing clear: a tax certificate is not a deed. You are not

buying the property. You are buying a debt, the opportunity to be repaid,

with an excellent rate of return, by the property owner.

Now heres the best part

If the property owner does not pay the prescribed amount by the end of a

certain period, THEY LOSE THE PROPERTY! And almost always, the

property is now OWNED BY YOU! Free and clear, with fantastic profits

for little or no risk!

There are two different ways to buy tax certificates:

1. Buying tax certificates through auction at a public oral bid tax

sale

2. Buying tax certificates direct from the local officials

Ill simply describe each technique in a step-by-step manner in the coming

pages. Always remember that county and state governments all have their

local rules and regulations, which can alter the way these tax sales work

out. Its always in your best interest to look into local rules and regulations

to discover the little details specific to each local tax system that can help

you make huge profits at little or no risk!

Ill summarize each of the systems as before, with pros and cons and a final

grade.

1. BUYING TAX CERTIFICATES AT ORAL BID TAX SALES

As weve established, the best type of tax sale to attend is the one where

youre the only investor present. That way, youre free to purchase

everything all the tax certificates youre interested in at the minimum

opening bid, generally the cost of delinquent back taxes plus penalties, and

administrative fees usually under $5,000 for a property worth $100,000!

But what happens if theres more than one investor at the sale? Maybe you

go to a sale in Arizona, excited to buy some excellent tax certificates, and

theres Not-So-Smart Jimmy, who you ran into at the tax deed sale in Las

Vegas!

If two or more investors want to buy the same tax certificate, there needs to

be some mechanism in place to decide who gets the tax certificates.

Generally, there are three types of bidding structures used by the various

states that sell tax certificates.

Bidding Down Interest.

Each state sets a maximum interest rate permitted on tax lien

certificates. Rates range anywhere from a relatively wimpy 6%

to an amazing 24% return on your investment. In some

situations, the rate of return on a certificate approaches an

astronomical 300%!

In any case, one method of bidding for a tax certificate is

bidding down the interest attached to the certificate. The

basic price for the certificate remains the back property taxes

plus any costs and fees, but bidders can competitively

decrease the interest attached to the tax certificate.

EXAMPLE

Bidding Down The Price

You and Jimmy Not-So-Smart are interested in the tax

certificate for a property in New Jersey, and you both decide

to bid on it. The maximum interest rate on a tax certificate in

New Jersey is a mouth-watering 18%, but Jimmy wants that

certificate. He decides to bid 17%. This means that if he

successfully purchases the tax certificate, and the property

owner redeems the property, Jimmy will receive a 17% return,

not an 18% return on the tax certificate.

However, you are very excited about the property, so you bid

down to 14% interest. Jimmy lets it go at that. But, having

again done your due diligence, you know something Jimmy

doesnt.

The research youve done has revealed that the propertys

owner, a nice old lady named Burgess, passed away peacefully

a number of years ago with no heirs and no one with a legal

interest in the property. You dont expect anyone will redeem

the property at all! So bidding down the interest for

repayment in this case DOESNT MATTER AT ALL! Since

no one will be redeeming the property, no one will be paying

the rate of return on the tax certificate, whether it is 50% or

2%!

In this particular case, since you know there will be no redemption of the

property, the interest rate doesnt matter. The only thing that does matter is

that when the redemption property expires, the property can be yours for

the tiny price of the delinquent back taxes! Due diligence triumphs again!

And you are in a position to receive huge profits for your relatively tiny

purchase of a tax certificate for essentially the price of some back property

taxes!

Bidding Up The Price

This bidding formula has the bidding start at the minimum price

for the certificate delinquent property taxes plus costs and

bids go higher from there. The price INCREASES as the bidding

goes on. The bidding adds to the price of the tax certificate

hundreds or even thousands of dollars!

The important thing to realize here is that not all states treat this

surplus amount the same. One state might force the property

owner to pay the surplus amount plus the interest, while another

may declare that the property owner owes only the original

amount of back taxes, and the investor has to eat the surplus. BE

CAREFUL, and make even more sure you do your research and

know the local rules before you jump into a bidding system like

this. The opportunity exists to LOSE MONEY.

EXAMPLE

At a tax sale in a tiny county seat in a mountainous part of

Colorado, you run into Not-So-Smart Jimmy again (at this

point you wonder if he has some sort of tracking device

secretly attached to you). Theres also another investor at the

certificate sale well call her Impulsive Rhonda.

You buy a couple of tax certificates that are uncontested by the other two:

its possible the certificates will not be redeemed by the property owners,

giving you the opportunity to acquire their property for a tiny fraction of its

assessed value! If the property owners do redeem their property, you still

get a magnificent return for your investment (Colorados tax certificate

interest rate fluctuates - in 1998 it was 14%!).

Not-So-Smart Jimmy and Impulsive Rhonda, however, get

into a bidding war over a ski chalet. Jimmy eventually wins

out by bidding$3,500, $2,500 over the cost of the tax

certificate, which was $1,000. Not-So-Smart Jimmy is

banking on the owner not redeeming the property, and if that

happens, he still makes an excellent profit, the deed to the

property.

However, if even a year later, the property owner redeems his

chalet from Not-So-Smart Jimmy, he or she only has to pays

Jimmy THE ORIGINAL $1,000 OF BACK PROPERTY

TAXES PLUS, AS AN EXAMPLE 14% ($140!). According

to the state laws of Colorado, Not-So-Smart Jimmy is

responsible for the surplus bid, and he now is holding a loss of

over $2,000!

Bidding Down Percentage Ownership

The bidding process in these states proceeds with the bidders

competing against each other, with the winner agreeing to

accept the SMALLEST percentage interest in the property. So

the bidding for a tax certificate starts with the property offered

as a whole, a 100% undivided ownership. A second bidder

would agree to accept less ownership, lets call it 99%

ownership. The remaining 1% is shared as something called a

tenancy-in-common with the original property owner. If the

property is redeemed, none of these percentages matter, and

you make a hefty return on your investment.

However, if the certificate, and therefore the property, is not

redeemed, the bidder DOESNT HAVE COMPLETE

OWNERSHIP OF THE PROPERTY. Its not that the bidder

owns 99% of the property area and the property owner only

owns that bush over there. Tenancy-in-common means you

cant sell the property without:

(a) the permission of the foreclosed-out owner

(someone who may not be inclined to cooperate with you);

or

(b) a drawn out legal proceeding called a

partition action

In any case, tenancy-in-common of a piece of property gained

through bidding down percentage ownership is quite a can

of worms. Be VERY LEERY of bidding down percentage

ownership at tax sales using this system.

EXAMPLE In Iowa the rate of interest on tax certificates is a phenomenal

24%! Worth taking a look at, certainly. However, most

counties in Iowa do use the bidding down percentage

ownership system at their tax sales, so you resolve not to get

involved in any competitive bidding. Not-So-Smart Jimmy,

however, is very excited about a house down by the river, and

he bids down on that propertys certificate to 65% ownership.

If the owner redeems the property, Not-So-Smart Jimmy gets

a 24% return on his investment! However, the owner of the

house, an ornery old Iowan named Mabel Cheeseharker

convinces some of her relatives to help her out. She raises

enough money to pay the price of the certificate delinquent

property taxes plus costs and the 24% interest to boot! She

has redeemed her property, and now Not-So-Smart Jimmy is

tenant-in-common to a very nice house in Iowa occupied by a

very stubborn old Iowan, who is the other part owner.

However this turns out, it will take a long investment of more

time and money on Not-So-Smart Jimmys part to resolve it,

time and money better spent finding fantastic real estate

profits at little or no risk!

Meanwhile, you make off with a number of uncontested tax

certificates, two of which eventually are not redeemed by the

property owner, providing you with a fantastic, UNDIVIDED,

profit on your very secure investment!

PUBLIC ORAL BID TAX CERTIFICATE SALES REPORT

PROS & CONS

PROS

Huge Interest Rates.

Many states offer absolutely astonishing rates of return on tax

certificates. Many states offer double-digit interest rates on your

investment, as much as 24% in many places! This rate eclipses the

rate of return you could achieve with more mundane instruments like

IRAs or the bond market, and, with quick turnaround times on the

rates of return, your money is active, constantly being reinvested

even better returns!

Of course, attractive as it might seem, this is only the consolation

prize. The jackpot is:

PROPERTY OWNERSHIP

This is the true goal. After the period of redemption passes with no

one redeeming the property, in most states tax certificates can be

converted into UNCONTESTED ownership of the property they

were a lien on! Which means that for a tiny fraction of the value of

the property, delinquent back taxes and costs, you can secure

ownership of valuable properties!

First Lien.

It still holds true here that many state governments consider a

property tax lien the priority lien on a property, meaning that all

other outstanding debts are wiped off the board, giving you free and

clear ownership of the property.

Free and Clear.

Generally, once you have the deed in your hand, its yours. No

messy contact or litigation from previous owners.

Great Equity.

A first lien wiping out all secondary liens on the property means its

very possible to acquire HUGE equity in the property secured by the

tax lien, upwards of 95% EQUITY!

Lack of Popularity.

While purchasing tax certificates is becoming more popular, many

traditional real estate investors still wish to buy deeds to property up

front, through public oral bid auctions. They are leery of the fact

that youre purchasing a certificate, not the actual deed to the

property, and they dont like the redemption period attached to

certificates.

This is great thing for a savvy investor like you, because those

people who dont want to invest in tax certificates means less

competition! This gives you a better chance of finding sparsely

attended sales where you can swoop in and buy certificates

UNCONTESTED, allowing you to purchase what you want to

purchase at the absolute MINIMUM BID, back property taxes plus

minor costs and fees! And what do you get for that minimum bid?

The chance to acquire the property attached to the tax certificate!

CONS

Competition.

Competitive bidding can have all sorts of impact on the price of the

certificate. Bidding down interest or property ownership and bidding

up price can mess with your profits! Do your due diligence. Know

the local rules and customs BEFORE you start bidding.

Redemption Period.

The property owner does have a period of time to redeem the

property, BUT there are positive aspects to this situation. If they do

end up buying back the lien, you are entitled to a generally excellent

rate of return due to the interest rate attached to the certificate! You

and I would prefer the property, but not a bad consolation prize. All

the more reason to do your research, to try to discover certificates

less likely to be redeemed!

SUMMARY For the savvy real estate investor, purchasing tax certificates at annual tax

sales offers opportunities for truly outrageous profits for pennies on the

dollar at little or no risk! The only wrinkle here is that less competition is

always better. Public bidding practices in various states can quickly turn

fantastic opportunity into an unattractive adventure, limiting your chances

to make huge profits on a tiny investment at little or no risk.

But if, as I know you will, you do your due diligence and keep away from

intense bidding matches, tax certificate sales offer some amazing

opportunities.

STEVES FINAL GRADE: A-

NOTE: These three bidding processes are predominant through states that

participate in selling tax certificates. A few states use other systems,

including:

Random Selection.

In much of Wyoming and certain counties in Colorado and

Idaho, local tax officials use a random selection system to

decide who gets to purchase a tax certificate, with no bidding!

What does that mean? You therefore get the opportunity to

buy a tax certificate without being subject to any bidding

down of interest or percentage ownership of the property, or

bidding up of the price. So someone will walk away with a

tax certificate to a property purchased at the minimum bid, or

back property taxes plus costs

However, that person may not be you. A random selection

system doesnt affect the yield or the security, but it does

affect your ability to purchase the tax certificate you are

interested. Just do the math. If there are 50 investors at a

particular tax sale selling 50 certificates, your chances are one

in 50 to be able to purchase ANY tax certificates! Luckily this

system is not used in a wide array of states.

First Come, First Served.

This is an excellent system for early birds! Essentially, the

first bidder to arrive at a tax sale gets the first right to

purchase or not purchase any tax certificates being sold that

day! Kentucky state law uses this system. In Montana it

effectively works out this way, due to low attendance at

annual tax sales, although in a couple of the more touristy and

vacation-destination counties, people have been known to

stand in line all day at the sale waiting to buy their certificates!

SECTION 4 Buying Tax Certificates Direct Alabama, Arizona, Colorado, Florida, Kentucky, Maryland, Montana,

Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota,

Wyoming.

If the exciting bidding atmosphere of public auctions isnt your thing, or if

you prefer an EVEN MORE effective procedure for buying tax certificates,

buying tax certificates direct or over-the-counter is probably an excellent

solution for you. In my opinion this is the MOST EFFICIENT method to

achieving the final goal, attaining property at a fantastic profit for a tiny

investment at little or no risk!

Often tax sales can be excellent sources of opportunities to acquire the

rights to real estate properties for a minimum bid of back property taxes

and related costs, but sometimes even the most savvy real estate investor

can have the deck stacked against them at public oral bid tax sales. Other

investors bidding your profits away, or strange local customs can prevent

you from reaching the promised land of gigantic profits!

I have the perfect solution for this problem: buying tax certificates direct

from the local tax authorities!

In most tax certificate states, if no one buys a certificate at the annual tax

sale, that certificate can be purchased over-the-counter after the sale from

local tax officials at the MINIMUM OPENING BID (delinquent real estate

taxes plus costs) on a FIRST-COME FIRST-SERVED BASIS. Its like

having your own private tax certificate service!

Heres how this system works

In most states if a tax certificate is not bought at the annual tax sale, it is

sold to the state or the county. In most states, any certificate sold to the

state or the county can be purchased from the country throughout most of

the rest of the year.

This is where the terms direct and over-the-counter come from. The

purchase is direct, as it is not contested by other bidders. It is over-the-

counter because you walk into the local tax officials office and buy the

certificates (this is exaggerating a bit, but not much) like you buy coke and

chips at the local grocery store! Theres no sticker shock, as the price is

almost always fixed at the minimum opening bid of back property taxes

and fees.

Theres also nobody grabbing at that last bag of Cheetos or that tax

certificate that you really want, because sales are generally performed on a

first come, first-serve basis. If youre at the counter, youre the only person

the tax official is going to be talking to about buying any specific tax

certificates!

And finally, if any of those tax certificates are not redeemed by the

property owner, you will generally get the title to a completely undivided

real estate property at that minimum bid of back property taxes and

assorted minor costs!

SHORTER REDEMPTION PERIOD

Speaking of the period of redemption, there another excellent hidden

aspect to buying tax certificates direct from state or local tax

authorities. As the investor, you can SIGNIFICANTLY REDUCE

the redemption period of any tax certificates.

As you know, tax certificates are encumbered by a redemption

period. During that period of time, which can last anywhere from

months to years, the property owner can redeem their property for

the price of the certificate, plus the appropriate interest rate assigned

to the certificate by the state (sometimes over 250%!).

However, generally, if a tax certificate is not sold to an investor at

the tax sale, and instead is bought by the state or county, the

redemption period begins counting down.

In other words, as soon as the tax sale is over, THE CLOCK

STARTS TICKING. If a states redemption period for a tax

certificate is one year, the property owner has one year from the date

of the tax sale to redeem the property from the state.

If, however, you purchase the tax certificate from the local tax

officials later in the year after the tax sale, the redemption period still

BEGINS ON THE DATE THE STATE TOOK POSSESSION OF

THE TAX CERTIFICATE!

EXAMPLE

Youve grown tired of Not-So-Smart Jimmy. Tired of him bidding

up the cost of your certificates, or even worse, bidding down

percentage ownership, ruining the chances of perfectly good

properties bringing you fantastic profits at little or no risk! So you

try a new strategy.

The local tax sale for Ward County in Minot, North Dakota takes

place every year on the third Tuesday of November. You dont go.

You wait nine months, avoid the six-foot winter snowdrifts in Minot,

and in balmy August of 2003 you saunter into the office of the Ward

County Auditor/Treasurer. No Not-So-Smart Jimmy in sight.

However, there are still quite a few tax certificates for sale from the

tax sale in 2000 (the year is important; Ill tell you why in a minute).

Equipped with your due diligence, you have already targeted some

excellent properties, and since there is no competitive bidding, you

buy them all at the minimum rate. Not a bad days work, huh?

Heres the fun part.

North Dakotas period of redemption is three long years. If you

bought those certificates at the tax sale in 2000, you would have used

them as shim for the sagging dining room table for three years before

you could be assured that the owner of the property could not redeem

them from you. Three years of waiting to see if your investment

came through.

HOWEVER, since you are purchasing (or being assigned) those

tax certificates from 2000 in August of 2003, the period of

redemption isnt three years. ITS THREE MONTHS.

North Dakota state law recognizes those certificates as having the same

force and effect as if such certificate had been issued on the date of sale.

In other words, the clock on those 2000 certificates started ticking almost

three years ago, they havent been redeemed yet, and youll know in a few

short months whether or not you are entitled to some amazing pieces of

property for a tiny investment at little or no risk!

So, as you can see, another advantage of buying tax certificates

direct is that you can SHORTEN THE REDEMPTION PERIOD,

which allows you to possibly reach much more quickly the primary

goal of this course: ACQUIRING PROPERTY AT A TINY

FRACTION OF ITS ASSESSED VALUE, AT LITTLE OR NO

RISK!

BETTER SERVICE

If thats not enough of a reason to skip public oral tax sales when

you can, heres another reason. In states where you can buy tax

certificates direct, if you purchase certificates at a time removed

from the annual tax sale, the staff of the local tax office will be much

more inclined to help you.

Tax sales are buy times in local tax offices. Staff is more likely to be

frazzled, uncommunicative, in a hurry. If you approach the local

staff, who have an intimate knowledge of the tax certificates and the

properties related to them, at a time removed from the public tax

sale, you can get a lot of your due diligence done right in their office.

Ill talk more about this in the tools and tips section, but local staff

can be an absolute treasure to you in your search for amazingly

profitable properties.

a) they may know which certificates are more likely to clear the

redemption period, providing you with the property itself, as

opposed to the redeemed tax certificate!

b) they very well may have a locals knowledge as to which local

areas and properties are the most valuable.

c) they might be willing to help you out with the little details

adding up a certificates correct price and interest, locating properties

on a street map, or just sending you to the best coffee shop in town!

BUYING TAX CERTIFICATES DIRECT OR

OVER-THE-COUNTER

PROS & CONS

PROS

No Competitive Bidding.

At public auction tax sales, especially in counties with large populations,

competitive bidding from other investors can drive up the price of the

certificate, CUTTING INTO YOUR PROFITS or even splitting the

property into pieces much more difficult to re-sell or do anything else with.

If buying over-the-counter, you will usually be asked to pay

the minimum bid (back property taxes, plus costs) for the full,

undivided property, no more!

First Come, First-Served.

Buying direct from local tax officials, as opposed to at the

public tax sale, means no lines, no random selection, no other

investors around to cloud the issue. You walk in (or even call

on the phone!), and choose from the array Since there is no

competitive bidding, there is no difficulty in acquiring the tax

certificates you want.

Year-long Access.

Some states hold each and every annual county tax sale on the same day of

the year. Again, do the math. Unless you own some sort of science fiction

cloning device, theres no way you can be at tax sales for fifty counties if

all of them take place on February 7! If you have a fast car, you might be

able to make two. One day out of 365 in a year severely limits your

opportunity window to acquire tax certificates that could lead to you

owning property at a huge profit (for little or no risk, right?)!

However, in most states that use this system, if a tax certificate

is not sold at the annual tax sale, it is sold to the state or

country. And, in most states, a savvy investor like you can

buy any certificate sold to the local government almost year-

round! If you buy tax certificates over-the-counter, you can

MAXIMIZE YOUR PROFIT OPPORTUNITIES by being

able to buy tax certificates on many days in many counties

throughout the year, as opposed to just one.

Shorten the Redemption Period.

Instead of buying tax certificates at a local tax sale and waiting the entire

redemption period to find out whether you can take possession of the

property the certificate holds a lien over, buy the certificates direct. As

time lengthens into the redemption period, it becomes less and less likely

that a property will be bought back, or redeemed.

In many states you can buy tax certificates from local tax

officials over-the-counter far into the redemption period,

sometimes shortening your wait to a few months. In some

cases, you can start the process of obtaining a tax deed to the

property immediately!

Better Service.

Local tax staff is far more likely to be helpful and non-frazzled

when selling certificates over-the-counter, as opposed to

during the mayhem of a public oral bid tax sale.

CONS

Geography.

Many states sell tax certificates over-the-counter, but not all of

them. If more did, you and I would have even greater

opportunities to acquire fantastic properties for a tiny

investment at little or no risk!

STEVES FINAL GRADE: A+

____________________

CHAPTER 3:

THE RECAP

____________________

There are as many methods for purchasing tax deeds and tax certificates as

there are states in the U.S., probably as many as there are counties. With

the fence of lingo and mumbo-jumbo that all of the local tax authorities

have surrounded themselves with, however, theres really only one goal:

ACQUIRING PROPERTY.

The single most important thing to take out of this chapter is that almost

everywhere in this country, using this system, there are opportunities to

make FANTASTIC PROFITS by acquiring real estate property for A

TINY INVESTMENT at LITTLE OR NO RISK!

Heres a recap of my final grades for each of the systems we covered

above:

1. PUBLIC ORAL BID FORECLOSURE AUCTION

OR DEED TAX SALE

Arkansas, California, Florida, Idaho, Kansas, Nevada, New Mexico, New

York (in some cases), North Carolina, Ohio (in some cases), Pennsylvania,

Utah, Virginia and Washington.

PROS

Low Opening Bid. Usually the cost of the back taxes, plus

administrative costs and penalties!

First Lien. Many states consider property tax liens as priority

to all other liens, wiping out any secondary ones!

Great Equity. A first lien may mean gigantic profits and

huge equity for pennies on the dollar!

Free and Clear. Generally, once you have the deed in your

hand, its yours. No messy contact or litigation from previous

owners.

CONS

Competition. The fact that the state holds an oral bid auction

(i.e., in public) means others attending the tax sale might want

the same properties youre looking at, possibly driving up the

bid.

STEVES FINAL GRADE: A-

2. PUBLIC ORAL BID

AUCTION TAX SALE

Alaska, Maine, Oregon, Minnesota, Wisconsin, plus some improved

properties in New Mexico and New York.

PROS

First Lien. Many states consider property tax liens as priority

to all other liens, wiping out any secondary ones!

Free and Clear. Generally, once you have the deed in your

hand, its yours. No messy contact or litigation from previous

owners.

OK Equity. A first lien can still mean big profits and great

equity, as you are acquiring the property with all other liens

discharged!

CONS

Competition. You still run the risk of competitive investors

driving the price of the property up.

Higher Opening Bid. Not usually the cost of the back taxes,

plus administrative costs and penalties! Generally these state

offer their counties the ability to set opening bids at higher or

much higher levels.

STEVES FINAL GRADE: C-

3. PUBLIC ORAL BID TAX CERTIFICATE SALE

Essentially, Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa,

Kentucky, Maryland, Michigan, Mississippi, Missouri, Montana, Nebraska,

New Jersey, North Dakota, Oklahoma, South Carolina, South Dakota,

Vermont, and Wyoming. California, New Hampshire, Ohio, and New York

allow tax certificate sales, but theyre not universal.

PROS

Huge Interest Rates. 16% is not unusual; can go up to 240%.

PROPERTY OWNERSHIP. Chance to acquire property!

First Lien. Many states consider property tax liens as priority

to all other liens, wiping out any secondary ones!

Free and Clear. Generally, once you have the deed in your

hand, its yours. No messy contact or litigation from previous

owners.

Great Equity. A first lien wiping out all secondary liens on

the property means its very possible to acquire HUGE equity

in the property secured by the tax lien, upwards of 95%

EQUITY!

Lack of Popularity. Not as many investors to bid away your

profits!

CONS

Competition. Competitive bidding can have all sorts of

impact on the price of the certificate. Bidding down interest

or property ownership and bidding up price can mess with

your profits! Do your due diligence. Know the local rules and

customs BEFORE you start bidding.

Redemption Period. They can last from months to years.

But youre wait can be well worth it, if the property owner

doesnt redeem the property, and it becomes yours!

STEVES FINAL GRADE: A-

4. BUYING TAX CERTIFICATES DIRECT

Alabama, Arizona, Colorado, Florida, Kentucky, Maryland, Montana,

Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota,

Wyoming.

PROS

No Competitive Bidding. Buying over-the-counter means

completely avoiding competitive investors driving down your

profits!

First Come, First-Served. No lines, no random selection, no

other investors around to cloud the issue. You walk in (or

even call on the phone!), and choose from the array. Since

there is no competitive bidding, there is no difficulty in

acquiring the tax certificates you desire.

Year-long Access. You can buy for much of the years as

opposed to on only one day!

Shorten the Redemption Period. Buying certificates late

into the redemption period reduces your waiting time before

you can acquire the property attached to the certificate!

Better Service. Local tax staff is far more likely to be helpful

and non-frazzled when selling certificates over-the-counter, as

opposed to during the mayhem of a public oral bid tax sale.

CONS

Minimal. If you do your due diligence and homework,

buying tax certificates direct can be an excellent strategy for

fantastic profits from a tiny investment for little or no risk!

STEVES FINAL GRADE: A+!

SO NOW WHAT? But now that you understand the opportunities out there, how do you reap

the rewards? What do you look for in a property? How do you bid at an

auction? How do you avoid competitive bidding?

Ive got a pile of how-to hints and advice in the Book Two, which will

focus on straightforward, practical steps that can put you on the road to

making fantastic profits for a tiny investment at little or no risk!

_____________________

_____________________

-BOOK TWO-

_____________________

MAKING YOUR NEW

KNOWLEDGE PAY OFF!

Steves Guide To Tax Lien Fortunes

_____________________

OK, youve done your homework and know all about the world of tax

liens, right? Now its time to put all the knowledge to work. In this part of

the book, Im going to walk you through the best strategies for making real

money in real estate. Read everything, and real it carefully, and then you

can get out and hit the ground running.

Lets get to it

____________________

CHAPTER 1:

THE DREAM SALE

____________________

Youve found it! After weeks of searching through the wilderness of

bidding-up prices and local random-selection for bidder rules, all the stars

have aligned and youve located the dream tax sale. Its not the location,

though Colorado in December and Arizona in February can be nice. Its

not the people, in fact the fewer the better.

The following four conditions are the prerequisites for an excellent tax sale,

which will offer you the opportunity to make HUGE PROFITS for a TINY

INVESTMENT at LITTLE OR NO RISK:

Lowest Possible Opening Bid.

The opening bid at a tax sale is typically just delinquent property taxes,

plus administrative costs and fees, often under 5% of the assessed value of

the property!

Free and Clear.

Many times a tax lien is a priority lien, meaning that all other

liens on the property upon purchase or acquisition of the

property!

Excellent Equity.

If you end up acquiring the real estate for that opening bid,

you could have very large percentage equity in the property!

No Competitive Bidders.

The only thing better than just one competitive bidder at a tax

sale is no competitive bidders at a tax sale. That way, no one

can bid up the lowest possible opening bid!

In all honesty, finding a tax sale with all of these characteristics is a bit

unlikely. Many self-proclaimed real estate gurus present a similar checklist,

and expect you to travel all around the country searching for the perfect

sale. But what if you cant travel the country? What if you, like almost

everybody else in the world, have a limited budget and limited time

window? There are still methods and ways to dramatically improve your

chances to make huge profits for a tiny investment, at little or no risk at any

tax sale!

So if youre not at the dream sale, how do you decide what to purchase?

Now that I mention it, forget about deciding! How do you even make a

purchase? Where do you find tax sales? Whats the bidding process

about? How do you locate likely properties? Once you locate them, how

do you evaluate them? What should you be looking for?

Ive dedicated this section of the eBook to answering all of those questions,

and many more. I want to move past the empty promises that so many

other real estate hucksters might give you.