I use www.NACO.org to find tax sale property lists online for tax lien and tax deed sales. This only works for counties that have this information online. For counties or states that do not have this information online, you can either call the tax collector and ask how to get the tax sale list or you can buy the tax sale list from a tax sale list provider.

To go to the county’s web site, first go to naco.org and click on the link to find a county. This will bring you to a page with a map of the United States. Click on the state that you are interested in and you’ll be taken to that state’s web page with a list of all of the counties in the state. Find the county that you are interested in and click on that link. You will be taken to the NACO page for that county. Click on the link to the county on the top of the page and you will go to the county’s web site. Note that this will only work if the county has a web site.

Once you’re on the county’s web site, look for a link to the department or county office that is responsible for conducting the tax sale. For most states, this will be the county treasurer or county tax collector. Once you get to the web site of the person or department that conducts the tax sale, look for a link to a list of tax sale properties. For larger counties, you can usually find this online. The exception to this is the counties in the Northeastern states. A lot of the Northeastern states do not have county tax sales. Instead the tax sales are conducted by the municipality, so instead of looking for the county web site, in Vermont, New Hampshire, Maine, Rode Island, Connecticut, Massachusetts, and New Jersey, look for the municipal tax collectors web site – not county web site. New York has both county and municipal sales in some counties.

If you can’t find the tax sale list that you want online, you can always buy a list from a tax sale list provider. Even if you can find the tax sale list online for free, you still may want to purchase the list from a tax sale list provider. That’s because the list that you get from the tax collector does not always have the information that you need. Frequently it will only have a parcel ID number, owner name, and amount due. What you want to know is what is the address of the property, what is the assessment and value of the property, what type or class property is it, and how big is the property. All of this (and sometimes even more information) is included in the detailed list that you can get from tax sale list providers.

I get a lot of questions from people  that want to know how they can purchase tax liens or tax deeds through the mail and internet. They specifically want to know about left over tax liens and tax deeds. These are tax lien certificates or tax deeds that are ‘left-over’ from the tax sale. In other words no one bid at them at the sale and they were struck of to the county, state, or municipality. In most states if the delinquent tax property is not sold at the tax sale, it is struck of to the county or municipality. A few states allow the assignment of tax lien certificates or tax deeds to investors. There are pros and cons to purchasing leftover or assignment liens or deeds from the county.

On the positive side, there is no competition; you don’t have to bid against other investors. For liens and redeemable deeds, you may be able to purchase a lien or deed in which the redemption period has already ended, or is close to being over, in which case you may wind up with the property. For some deed states, since the county, state, or municipality has already taken title to the property, you may not have to go through a title clearing process (quiet title or title certification process). You’ll have to check with the county to find this out.

On the negative side, leftovers are usually not worth bidding on in the first place and that’s why they were not sold at the sale. In smaller counties, and in states where the tax sales are conducted by the municipality (New Jersey, and the New England states) there is usually nothing worthwhile that is left over. To find leftover tax liens or deeds, you have to go to counties that have very large lists (a few thousand properties) to begin with. And you’ll have to sift through a lot of junk to find good properties.

Sometimes you can find a diamond in the leftover tax sale list. I know a couple of tax lien investors in Arizona who do this regularly as well as a couple of tax deed investors (in Texas and Pennsylvania) who have done this. With more and more people becoming interested in tax lien and tax deed investing and going to the auctions, there are less leftovers available than there used to be. My advice is to use extreme caution and be extremely rigorous with your due diligence when purchasing leftover liens or deeds. I also believe that investing long distance in leftover liens or deeds is a mistake if you do not have someone that can physically look at the property for you.

 

If you are going to be successful at tax lien investing, you have to get good information. Many people rely on the free lists from the county or municipality. Some people use the tax sale list online on the county treasurer’s or tax collector’s web site along with information about the sale and information on how to register for the sale.

I find that most publicly available lists do not always have the information that you need to do your due diligence on the properties. Many times you will find these lists do not even include the property addresses. It usually does include the property tax ID number, the amount owed, and the owner of record; some lists may include the annual taxes. Some pertinent information that is usually not on this list will help you to do your due diligence on the properties is: The address of the property; the property classification – is it a farm, residential, commercial, or raw land; the type property – how it is zoned; the property assessment and annual taxes; the last sale price of the property; and mortgage information.

The good news is that you can get all of this information if you buy a detailed list from a tax sale list provider. I find that tax sale list providers that specialize in one state or area of the country do the best job of providing timely and meaningful lists. They are sometimes more thorough, since they are covering a smaller area, and they are more knowledgeable about the information that they provide. I’ve seen national providers frequently leave out one or two counties in a state or only list it when it’s to late to do proper due diligence for the sale.

Two of the smaller list providers that I recommend are LienSource.com – for New Jersey, Nassau County NY, Washington DC, and Florida; and ArizonaTaxLiens.com for Arizona.

For most other states you may be able to get the list online in excel format and then cross reference the parcel or tax ID number with the assessment data that you may also be able to find online. When you can’t find this information online – on the county tax collector’s or county treasurer’s web site, you may have no choice but to buy your list from a national tax sale list provider. In this case you can try taxsalelists.com.

Tax liens in connection with property taxes

Unlike personal debts, tax liens on real estate “run with the land”; that is, a property owner becomes responsible for payment even if the tax obligation was incurred by a prior owner. Depending on the law of the State or jurisdiction, the owner of the property may also be personally liable for payment of the taxes.

Payment of a tax lien may occur through various methods:

• Payment may be made directly by the property owner or, in many cases, indirectly by the mortgage holder using an escrow account. Notice is given both to the property owner and mortgage holder when a property tax is delinquent; thus, even if the property owner does not have an escrow account on the mortgage, the mortgage company will receive notice of the delinquency and may pay the tax. The mortgage company will then demand repayment from the owner/borrower and/or create an escrow account to recoup the proceeds, since the mortgage company might lose some of the value of its mortgage lien if the property were sold by the taxing agency to satisfy unpaid taxes foreclosure.
• If a property is sold by the owner prior to tax foreclosure by the government body, the tax lien (which is generally discovered as part of a title search) is usually paid as part of closing costs from the sale proceeds.
• Procedures vary from State to State. Generally, in the event a tax lien on personal property is not paid within a specified time (and after several notices are generally given), the property may be seized and sold at foreclosure sale. On real property, one of two methods may be used: either the property may be seized and sold (a tax deed sale), or in some States the tax lien may be offered to investors (in the form of a tax lien certificate) with an accompanying right for the investor, after a specified period of time, to institute foreclosure proceedings (a tax lien sale).

 

Federal tax lien in the United States

In the United States, the Federal tax lien may arise in connection with any kind of Federal tax, including but not limited to income tax, gift tax, or estate tax.

 

 Federal tax lien basics

Internal Revenue Code section 6321 provides:

Sec. 6321. LIEN FOR TAXES.

If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount (including any interest, additional amount, addition to tax, or assessable penalty, together with any costs that may accrue in addition thereto) shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belong to such person.^[1]

The term “assessment” refers to the statutory assessment made by the Internal Revenue Service (IRS) under 26 U.S.C. § 6201 (that is, the formal recording of the tax in the official books and records of the U.S. Department of the Treasury). Generally, the “person liable to pay any tax” described in section 6321 must pay the tax within ten days of the written notice and demand.^[2] If the taxpayer fails to pay the tax within the ten day period, the tax lien arises automatically (i.e., by operation of law), and is effective retroactively to (i.e., arises at) the date of the assessment, even though the ten day period necessarily expires after the assessment date. Internal Revenue Code section 6322 provides:

Sec. 6322. PERIOD OF LIEN.

Unless another date is specifically fixed by law, the lien imposed by section 6321 shall arise at the time the assessment is made and shall continue until the liability for the amount so assessed (or a judgment against the taxpayer arising out of such liability) is satisfied or becomes unenforceable by reason of lapse of time.^[3]

Under the doctrine of Glass City Bank v. United States^[4], the tax lien applies not only to property and rights to property owned by the taxpayer at the time of the assessment, but also to after-acquired property (i.e., to any property owned by the taxpayer during the life of the lien).

The statute of limitations under which a Federal tax lien may become “unenforceable by reason of lapse of time” is found at 26 U.S.C. § 6502. For taxes assessed on or after November 6, 1990, the lien generally becomes unenforceable ten years after the date of assessment. For taxes assessed on or before November 5, 1990, a prior version of section 6502 provides for a limitations period of six years after the date of assessment. Various exceptions may extend the time periods.

 

Perfection of Federal tax liens against third parties (the Notice of Federal Tax Lien)

A Federal tax lien arising by law as described above is valid against the taxpayer without any further action by the government.

The general rule is that where two or more creditors have competing liens against the same property, the creditor whose lien was perfected at the earlier time takes priority over the creditor whose lien was perfected at a later time (there are exceptions to this rule). Thus, if the government (which is treated as a “creditor” with respect to unpaid taxes) properly files a Notice of Federal Tax Lien (NFTL) before another creditor can perfect its own lien, the tax lien will often take priority over the other lien.

To “perfect” the tax lien (to create a priority right) against persons other than the taxpayer (such as competing creditors), the government generally must file the NFTL^[5] in the records of the county or state where the property is located, with the rules varying from state to state. At the time the notice is filed, public notice is deemed to have been given to the third parties (especially the taxpayer’s other creditors, etc.) that the Internal Revenue Service has a claim against all property owned by the taxpayer as of the assessment date (which is generally prior to the date the NFTL is filed), and to all property acquired by the taxpayer after the assessment date. (As noted above, the lien attaches to all of a taxpayer’s property such as homes, land and vehicles and to all of a taxpayer’s rights to property such as promissory notes or accounts receivable.) Although the Federal tax lien is effective against the taxpayer on the assessment date, the priority right against third party creditors arises at a later time: the date the NFTL is filed.

 

Subsequent liens taking priority over previously filed Federal tax liens

In certain cases, the lien of another creditor (or the interest of an owner) may take priority over a Federal tax lien even if the NFTL was filed before the other creditor’s lien was perfected (or before the owner’s interest was acquired). Some examples include the liens of certain purchasers of securities, liens on certain motor vehicles, and the interest held by a retail purchaser of certain personal property.^[6]

Federal law also allows a state — if the state legislature so elects by statute — to enjoy a higher priority than the Federal tax lien with respect to certain state tax liens on property where the related tax is based on the value of that property. For example, the lien based on the annual real estate property tax in Texas takes priority over the Federal tax lien, even where an NFTL for the Federal lien was recorded prior to the time the Texas tax lien arose^[7], and even though no notice of the Texas tax lien is required to be filed or recorded at all.

 Notice of release of Federal tax lien

In order to have the record of a lien released a taxpayer must obtain a Release of the Notice of Federal Tax Lien.^[8] Generally, the IRS will not issue a notice of release of lien until the tax has either been paid in full or the IRS no longer has a legal interest in collecting the tax. The IRS has standardized procedures for lien releases, discharges and subordination. In situations that qualify for the removal of a lien, the IRS will generally remove the lien within 30 days and the taxpayer may receive a copy of the Certificate of Release of Federal Tax Lien.

The difference between a Federal tax lien and an administrative levy

The creation of a tax lien, and the subsequent issuance of a Notice of Federal Tax Lien, should not be confused with the issuance of a Notice of Intent to Levy under 26 U.S.C. § 6331(d), or with the actual act of levy under 26 U.S.C. § 6331(a). The term “levy” in this narrow technical sense denotes an administrative action by the Internal Revenue Service (i.e., without going to court) to seize property to satisfy a tax liability. The levy “includes the power of distraint and seizure by any means.^[9] The general rule is that no court permission is required for the IRS to execute a section 6331 levy.^[10].

In other words, the Federal tax lien is the government’s statutory right that encumbers property to secure the ultimate payment of a tax. The Federal tax levy is the actual seizure of that property.

In general, a Notice of Intent to Levy must be issued by the IRS at least thirty days prior to the actual levy. Thus, while a Notice of Federal Tax Lien generally is issued after the tax lien arises, a Notice of Intent to Levy (sometimes misleadingly called simply a “notice of levy”) generally must be issued before the actual levy is made.

Also, while the Federal tax lien applies to all property and rights to property of the taxpayer, the levy is subject to certain restrictions. That is, certain property covered by the lien may be exempt from an administrative levy.^[11] (Property covered by the lien that is exempt from administrative levy may, however, be taken by the IRS if the IRS obtains a court judgment.)

A detailed discussion of the administrative levy, and the related Notice, is beyond the scope of this article.

In connection with Federal taxes in the United States, the term “levy” also has a separate, more general sense of “imposed.” That is, when a tax law is enacted by the Congress, the tax is said to be “imposed” or “levied.”

Notes

To be a successful bidder at a tax lien sale, you must be prepared. It’s a good idea to attend a couple of sales before you actually start bidding on properties. In this way you can become familiar with the bidding procedure, which is different in each state. New people are always amazed at what actually happens at a tax sale. It’s not what they expect. They expect to bid a healthy interest rate on a lien and are totally taken by surprise when the bidding goes down to zero and then up to very high premium.

There are a few things that you need to know before you bid at a tax sale. First of all you need to pay in full with cash or certified check for anything that you are the successful bidder on. Some municipalities will accept attorney’s checks and/or money wires but most tax collectors will only accept cash, or certified funds payable to the municipality.

Some tax collectors will allow you time to go to the bank after the sale to get a certified check, but some will not. You will need to know ahead of time if you will have to pay immediately after the sale or if you will be given time to go to the bank. If you won’t be able to go to the bank after the sale, you will need to have the required funds with you. Do not wait until the day of the sale to learn what forms of payment are accepted, or you could loose a successful bid.

Get in touch with the tax collector a few days before the sale to verify the time and place of the sale, find out what forms of payment are accepted, and whether or not you need to register ahead of time. Keep in mind that in most cases, half of the properties that are on the original list for the sale will be paid off and no longer available. You don’t want to waist your time doing due diligence on all of the properties on the original list. The tax collector should be able to give you an updated list with the current properties in the sale. In many cases the tax collector will fax you the list. A few municipalities will have their lists on their website. For very large municipalities you may have to go pick the list up at the tax collector’s office. Once you have an updated list, you’ll need a day or so to do due diligence on the properties. Even though you are not buying the property, you want to make sure that you’re not getting a lien on a worthless property.

If you are successful bidder on any of the properties, you will be required to give the tax collector a Tax Sale Bidder Information Sheet. Some tax collectors will require that you hand in the form before the sale, when you register. It has to be filled out with your name address and social security number, or federal ID number if you’re bidding under a company name. It may also have a required notice and disclaimer that you have to sign. Usually there’s room to fill in the lot and block numbers of the properties that you win, along with the % bid (0 if you paid premium), premium, if any, and the amount of sale (this is the amount of the lien and could be different than the total amount paid if you paid premium). Some municipalities also require you to fill out a W-9 form so be prepared with your business information if you’re bidding under a company name, or with your social security number if your bidding under your own name.

On the day of the sale, arrive early so that you can check on last minute updates (people are always paying their taxes last minute, rite before the sale), open taxes, and zoning if you need to. I like to arrive an hour before the sale begins. You’ll need to have the Bidding Form, certified checks, and the Bidder Information Sheet. Make sure that you’re seated and ready a few minutes before the sale begins. Turn off your cell phone, once things start everything happens very quickly, and any distraction can cost you.

After the sale you will have to pay for any liens that you purchased. If the tax collector doesn’t have change, they will send you a check for the difference, but you may have to wait until the next board meeting before you get it. Keep your receipts and a copy of the bidder information sheet. In some cases the tax collector will issue a certificate immediately, but in most cases you will have to wait up to 10 days and the certificate will be mailed to you.

On the following pages is the check list that I provide to all of my bidders to help them prepare for a tax lien sale. Please realize that each state again has its own requirements.

Check list for preparing for a tax lien sale

One week before the sale;

• Call the tax collector and verify the following information:
  

?Date, time and place of the sale.

Tax collector’s contact information
(name, address,phone, fax, and office hours).

• ??Which year’s taxes are being sold (previous year or current year)?

• ??Start of the municipality’s year. Are they on a calendar or fiscal year?

• ??What forms of payment are accepted? Do they take wire transfers? If they do, what needs to be set up ahead of time?

• ??Does the municipality have a year end penalty?

• ??Do you need to register for the sale ahead of time?

• ??How can you obtain an updated list for the sale? Will they fax you a list or will you need to pick it up?

Three days before the sale;

Get the updated list from the tax collector and do your due diligence. For specifics on how to do due diligence consult the special report on my web site “Step by Step Guide: How to do Due Diligence for Tax Lien Sales”. Check the

Following:

1. ??Are there prior liens on any of the properties in the sale?
2. ??Are there open taxes on any of the sewer or utility liens?
3. ??Check zoning on any vacant land in the sale.
4. ??If you are not familiar with the municipality, look at the tax map in  the tax collector’s or tax assessor’s office to find where the properties are located
   ?It’s a good idea to have your own map for street references.

One daBefore the sale;

• Based on your due diligence, decide which properties you will bid on, and what the maximum premium that you are willing to pay is on each of the properties. Be sure to:
• ??Register for the sale if prior registration is required.
• ??Go to the bank and get the certified funds and/or cash that you will need. (Unless you’re using wire transfers or will be given time to go to the bank after the sale).

The day of the sale;

• Get to the sale an hour early, and have the following with you:

1. Necessary means of payment.
2. ??Necessary forms – Bidder Information Sheet and W-9 form.
3. ??Your own bid sheet showing all the properties in the sale, with the properties that you are bidding on highlighted with premium numbers.