What is an Overbid? What’s Recoverable and What’s Not

What is an Overbid? What’s Recoverable and What’s Not
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This is a frequently asked question by my subscribers and can cause confusion especially because there are different uses for the overbid in some states.

An overbid is simply an auction mechanism to determine who will pay the most for a delinquent tax lien.

The opening bid at the auction is normally the total amount of taxes, fees and accrued interest owed.  The auctioneer then opens the floor for bidding.  These bidders call out amounts that are over and above the opening bid.  A winner is declared to whoever is willing to take the highest amount over the opening bid.

 The difference in price between the opening bid and the final bid amount is your “overbid”.

In most states, should the property not redeem (payoff) and be taken by an investor as a tax deed, this overbid can be collected by the delinquent owner.  States that allow this overbid to be recouped by their former owners feel that it’s a more fair system to those owners losing their property.  However, this mechanism leaves open several potentially profitable strategies we’ll discuss later.

States with Overbids

Numerous states utilize overbid auctions to sell their delinquent tax liens at their annual tax auctions.  However, every state is different in how their laws treat the overbid and it’s worthwhile to read the statutes and auction rules before attending the auction.  I’ll cover some of the differences as we dig deeper into overbids, but realize I can’t touch on every nuance in the law and it’s ultimately your responsibility to understand the statutes pertaining to your purchase.

I’d like to divide the overbid states into two sections.  The first is where the overbid is recoverable if redeemed and collectable by the former owner if a tax deed is struck off to the investor.  The second group are those states where the overbid is not recoverable should the lien redeem.  These states in the second group are not my favorite because you could potentially lose money on your investment if the property redeems. Furthermore, I’ve excluded states that sell a tax deed with a premium as opposed to just the lien.

 Group I – Overbid is Recoverable

  • Alabama
  • Connecticut
  • Indiana
  • Maryland
  • Missouri
  • New Jersey
  • South Carolina
  • Vermont
  • Washington DC

Group II – Overbid is NOT Recoverable

  • Colorado
  • Illinois
  • Mississippi
  • Ohio
  • West Virginia

5 Responses to “What is an Overbid? What’s Recoverable and What’s Not”

  1. Ronald says:

    “Overbid is Recoverable”- Georgia

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