Government Auctions in Real Estate Investing
August 6, 2010getlinksnow Comments OffHouseholders who failed to sell their property during pre foreclosure and have failed to meet their tax obligations will lose their homes to the government. The government frequently sells properties that it has acquired through tax foreclosure to people who can pay the taxes that are owed, providing an first-class real estate investing opportunity.. They are sold in transactions named tax foreclosure sales (or tax deed sales). The government does this to recover the taxes that the original homeowner did not pay.
In marketing tax foreclosure properties this way the government offers the liens, the unpaid taxes, the interest for those amounts, and the selling costs involved to interested investors in a public auction sale. In case there are many prospective buyers of these liens, the winner is granted the property in any of the following methods:
-Bid Down the Interest Method – The government fixes a maximum rate of return and the bidders have to stay within that rate limit specified. The investor accepting the lowest rate of return among the bidders is declared winner of the tax foreclosure property. In cases of ties on the bids, the impasse is resolved through a random or rotational method.
-This method is known as the premium method – In the premium method, an investor who is willing to pay the highest premium on the lien amount is declared the winning bidder. This method of selecting the winner in an auction is used and preferred in some parts of the country.
-This method is know as the rotational selection – The investor listedat the top of the list of bidders gets the first offer of the liens in the rotational selection method in the auction. If he decides to decline, the offer is made to the investor next in line and so on. The first bidder, who declined in the first round, is offered another lien only after an equal chance has been granted to all potential investorsthat are registered on the list.
-The next method is the random selection – In this method in an auction, the potential investor gets selected through a random process ordinarily done through the use of computers.
-The ownership bid down method – The lien in this method given to the bidder who buys the property at its lowest cost. If he buys it at 90% of the property cost, and in case of redemption of the lien by the original owner, this investor would only be eligible for 90% ownership and the remaining ownership of 10% would go to the original owner of the property in question.
Not all liens get sold right away in an auction and when this happens, the unsold liens remain in the hands of the government entity that conducted the auction. It could conduct another auction later on. In the meantime that the liens are unsold, the unsold liens are called “struck” liens.
Make it a point of fully understand the type of auction you are going to. The last thing you want is to miss out on a good investment because you don’t understand the auction procedures. If you are interested in learning how to double your income doing what you love, then you need to check out Raymond Aaron right now.