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Tax Lien Sales (FIFA Auctions) – Cold Hard Facts

You’ve seen the late night ads. I’ve seen them, too.

Mark and Mary Hopton of Shecstedler, New York, purchased this beautiful 5 bedroom 3 and 1/2 bath home for just $1100!

Right.

Here’s what Mark and Mary actually did: They bought a lien against a 5 bedroom 3 and 1/2 bath home for just $1100. Value of their lien? $1100 plus maybe 20% …. of eleven hundred dollars.

Here’s what the commercials don’t tell you:

1. Virtually every state allows the owner or any interest holder in any lien against the property (including mechanics liens) to pay off that lien for the price you paid for the tax lien plus a small amount of interest. The higher the value of the tax lien the more likely you are to end up with the property.
2. The commercials will tell you? “you can earn 20% interest on this $500,000 home” what they mean is you can earn 20% interest on the amount of the lien … not the value of the property.
3. Other liens may, and probably do in many states, take presidence over your lien. Any debt secured by the property is over yours. Even if you end up with the property because of the lien you’ll have to pay those other debts and liens to get a clear title unless you want to wait the 12 to 24 months to foreclose.
4. Any lender who has a huge outstanding mortgage is going to pay off your lien (their prerogative) before foreclosure so they’ll have a clear title to the property. Then they’ll foreclose on it and put it on the market.

There are, of course, other costs even if you foreclose. Firstly there are the costs of having the Sheriff serve each lien holder or, in the event the sheriff cannot serve, the cost of publishing your notice in the local legal paper for two consecutive weeks. Then there is the cost of the court. These costs vary across the nation and I won’t dare attempt to publish them here.

Now on the Positive side ….

It can, and does happen. I have an uncle who acquired quite a number of properties through FIFA sales. Many of them were almost junk when he bought them but he did, quite literally, get them for next to nothing. He put large sums into the rehabs but held the properties for years and then liquidated and ended up with a nice profit.

A more likely scenario is this: A run down home with a tax lien near 10% of the value of the home and a mortgage with less than 50% of the value of the property could become yours. Say an $80,000 property for $8,000.

Either way it’s your money. You’re going to pay cash for that tax lien. The worst that could happen (as far as I know) is you could buy a tax lien for $250 plus whatever admin fees there are at your auction (maybe $40 to $100) and then have an equity holder pay the tax lien off for $275 plus or minus.

Here is a good article on Tax Sales from a County Government office near Atlanta.