July 17, 2020

Why Tax Sales are Looking Different During COVID-19 Pandemic

By Charles Sells

When the novel coronavirus COVID-19 first emerged on U.S. soil and began spreading across the country, a lot of things came to a screeching halt. Now, as the economy “reopens” and various aspects of our lives return to something a little closer to normal, another unavoidable aspect of local government is starting to rumble back to life: tax lien and tax deed auctions.

Not surprisingly, tax sales are going to look a little different than they used to. Many of the sales are moving online – even the steadfastly in-person events from pre-COVID days. In states like Nevada, where there were nearly 600 parcels awaiting auction after three months of inactivity, the city government is desperate to get the sales moving again in order to access essential city funds. Nye County treasurer John Prudhont told a local news outlet he believes restarting the sales will actually bring more homeowners current on their taxes, since many homeowners have opted not to pay off their liens since the sales have been stalled.

“We hope that property owners will pay off their taxes so that we can remove their properties from auction,” Prudhont said. “The goal is to recover revenues.” Nye auctions will certainly have a different look as the county forgoes live, in-person auctions for live online auctions. That is just one change, however. In many ways, tax lien and tax deed sales are going to change for good after the coronavirus – just like so many other things in our lives.

A Change of Platform

Probably the most notable change for most tax lien and tax deed investors will be that most tax auctions will be online now and for the foreseeable future. For investors who relied on personal connections or reputation to help them snag the best deals, that advantage will largely be gone now. Also, investors who simply throve on the adrenaline of bidding may have to rein themselves in when attending an online tax sale. After all, you might not be bidding against anyone serious but yourself.

The changing platform will also affect investors’ ability to bid effectively and in real time, since not everyone enjoys the same caliber of internet access or is as web-savvy as the competition. Furthermore, it seems highly likely that at some point in the near future, many unwary bidders who are not sufficiently cautious with their personal information could end up having their personal and financial information exposed and compromised.

Take the Proper Safeguards

What is the solution?

For starters, you need to make sure that you are using a proven platform when you bid on tax liens or tax deeds. Do not use an open connection, and make sure that you know, in advance, what information the platform will require you to provide in order to bid on tax liens or deeds and actually win an auction. Do not provide anyone claiming to be with the city government or the auction platform with any information about your bank account or personal data unless you are able to confirm they are who they say they are.

A lot of this information may seem like common sense, but many real estate investors have found themselves in tough positions when faced with the possibility that they might “lose” a really good deal. It can be tempting to assume that “it couldn’t happen to me” when it comes to identity theft and a variety of phishing scams, but it certainly can. Don’t let using a new bidding platform be the reason you permit a lapse in judgment.

The Rules Have Probably Changed

Tax lien investing has always been one of the more complicated areas of real estate investing simply because every county has its own rules for how tax lien and tax deed auctions work. This will likely continue to be the case for now, although it is likely that many of the rules around online auctions will standardize over time simply because the world wide web is, as the name suggests, a more global platform than the local courthouse steps.

For now, tax lien investors will likely see a variety of bidding rules and regulations for what will be mostly online auctions. In the event that a city opts to host a physical event, expect to be limited in terms of where you can stand, how you can interact with other investors, and even how you will pay for your properties.

The biggest change for many investors will be the removal of reserve bids. In the past, counties often set a reserve bid in order to prevent the “loss” of a property for too low a price. Now, however, many are opting for no-reserve auctions. This does not necessarily mean you can go in and bid a dollar to win something, however. Most tax lien auctions have a minimum bid that the county has set in order to avoid receiving bids that will not cover the costs associated with the debt on the property.

In some counties, the entire bidding and auction process has changed. For example, in Nye County, auctions are now staggered over the course of the day and close at intervals throughout the day. However, in order to bid, investors must have put down a deposit and paid a processing fee. Although many investors may be interested in bidding, the fee and upfront deposit may slow many “newbies” down, which could be good for experienced investors.

How to Stay Informed About Tax Lien and Tax Deed Auctions

If this is all starting to sound a little bit overwhelming, it should. Tax lien investing has never been a particularly simplistic effort. However, today’s tax lien and tax deed auctions should not feel any more intimidating or complicated than those of 2019. After all, it is mainly a question of staying informed and educated about the best ways to acquire these liens and deeds.

One of the best ways to stay informed is to sign up for notices from the County Treasurer’s office in counties in which you are interested in acquiring properties. After all, the county’s goal is to help you acquire those properties so that either you will pay off the liens or the homeowner will. A county can easily have more than $1 million in delinquent tax liens, and those funds are generally directly linked to essential services provided by the municipal government. As one online bidding platform CEO explained, “[My company]’s services make bidding easier than ever…. We are going to help [the county] recoup every cent possible for the benefit of the county’s residents.” He concluded, “You’re looking at the new normal.”

Don’t let “the new normal” pass you by! If you are unfamiliar with tax lien or tax deed investing or if you simply are not sure how to navigate today’s online tax auctions, working with a boutique firm or an investment group can help you gain the leverage and experience you need to compete in this sometimes challenging sector.

Charles Sells is the founder and president of The PIP Group, one of the largest real estate investing agencies of its kind with more than 700 investors worldwide. The PIP Group represents investors large and small, doing hundreds of thousands of transactions representing tens of millions of dollars each year. Learn more about PIP Group, tax lien and tax deed investing, bank foreclosures, and push-button, turnkey servicing for your investment properties at PIPGroup.com.

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