South Carolina Tax Lien Basics – The Overbid

South Carolina Tax Lien Basics – The Overbid
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This year’s South Carolina tax lien auctions are finishing up.  But, for those of you heading to the auction or just want to learn more about this great state for tax lien investors, I wanted to summarize how the penalty rate works in South Carolina. You can also find more detailed information in my Kindle e-book on South Carolina tax liens.

Penalty Rate

Unlike most states, South Carolina doesn’t charge a default interest rate on the outstanding tax amount.  Instead, they pay a 3% penalty at the beginning of each quarter after the sale.  So, if you purchase a lien at the October sale, you’ll automatically receive the 3% if it were to redeem the next day.  However, you will not receive additional interest until January when you’ll earn another 3%.  You earn this 3% penalty each quarter for four quarters or a total of 12%.

Maximum Penalty Rate

You may not earn more in penalty on your South Carolina tax lien than the amount set for the opening bid.  This amount is set by the Forfeited Land Commission and is usually the total amount of tax owed.  You can estimate this by doubling one year’s worth of taxes.

Overbid

At the auction, the opening bid will be this amount set by the Forfeited Land Commission.  Then, bidders will bid-up the price of the tax lien in increments set by the auctioneer.  This amount is called the overbid.  You’ll earn interest on the full amount of the initial bid plus the overbid.  However, since the penalty rate is capped, you may not receive a full 12% on your interest.

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  1. […] and payment collection is handled by the county tax collector during that time period.  It’s an overbid state, meaning that you have to bid an amount over and above what’s owed for taxes; but that just […]

  2. […] is also true at auctions where you bid a premium over and above the tax amount (Overbid States).  Generally, these overbids do not receive any interest, so because you are investing more […]

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