With the 2015 Florida Tax Lien Certificate auctions coming up shortly, I’ve compiled a list of most frequently asked questions from my newsletter subscribers about the Florida tax certificate auction. If you haven’t subscribed yet, click here! Florida hosts the largest tax lien auctions in the United States and it’s easy for just about anyone to get involved in since most of the auctions are online.
Top 10 FAQs about the 2015 Florida Tax Auction
1. How does the penalty and interest rate work?
Bidding starts at 18% and works in .25% increments until the lowest bidder is reached. If there is a tie, then the winner is chosen at random.
You’ll actually earn the higher of 5% of the tax amount (the penalty) or the total accrued interest at your bid rate.
So, if you win a bid at 12% and the lien redeems in the first month, you’ll earn your 5% penalty. If the lien redeems in the seventh month, you’ll earn your accrued interest (which is 7%) and the penalty drops out.
2. What are the typical rates that the liens sell for at the tax auction?
The Florida tax lien certificate auctions are very competitive. There are lots of banks and funds bidding on these liens such that all of the decent property are bid down to a .25% (thus, they are counting on earning the 5% penalty and the lien redeeming quickly).
Commercial properties and viable land parcels tend to be bid down to between 6-12%. Risky properties will go in the mid to high teens. If you win a bid at the max rate of 18%, you probably did a poor job in your due diligence.
3. What is proxy bidding?
In the internet tax auctions, you can put your minimum acceptable bid in. The system will automatically compare your bid to all of the other bids in the batch. If you’re the lowest bidder, you’ll win the bid at .25% below the next highest bidder. Thus, if you bid 5% and someone else bids 7%, you’ll win the bid at 6.75%.
4. When can I file for a tax deed application?
Two years after the taxes are due (typically, 22 months after the sale), you can file for the tax deed application also known as a TDA. Thus, you can file in April, two years after the year of the sale.
5. Can I contact the property owner or go on the property?
No, Florida statutes explicitly state that you cannot contact the owner of the property within 2 years of April 1st of the year of the sale. Also, you have no possessory rights on the property until you have a deed issued.
6. What is a clerk sale?
If the tax certificate does not redeem after you file the tax deed application and the county clerk has made all of their required notices, the clerk will auction off the property publicly to the highest bidder above the total delinquent tax amount. If the property is not purchased at this clerk sale, then the tax certificate holder will be issued a tax deed to the property (unless it’s a homestead property, see next).
7. What is the lands available list?
If a homestead property does not sell at the clerk sale, the tax certificate holder has the option to send it to a second sale. If it does not sell then, the tax certificate holder has the right to purchase the property at half the assessed market value minus their investment. If the certificate holder chooses not to purchase the property, it goes onto the county lands available list where it is available to the public for half the assessed value.
8. What liens are ahead of the tax certificate?
Municipal liens and fines are ahead of the certificate. Also, a new law passed recently allows HOA fees to not be eliminated upon issuance of a tax deed.
9. Can I really compete against the corporate buyers?
It’s very tough nowadays to get a good rate–gone are the days when you could win liens on decent properties in the teens or high single digits. Plus, the corporate entities put hundreds of online bidders into the mix so that they have a better chance at winning any ties.
10. Where can I find out more information on the auction?
Here, of course!
You can, however, find decent rates on commercial properties, some land parcels and the more rural counties where there is less competition. Or, you can just be content with earning the 5% penalty on good properties–it’s better than what you can earn at the bank!