Indiana Commissioners Sales About to Kick Off Again
Indiana Commissioners Sales will be kicking off in earnest right after the new year. What’s a commissioner’s sale?
It’s a tax lien sale with special rules, where liens that weren’t purchased at the last sale are offered. More details here and in future installments.
I’ve decided to do a 4-part series to give you everything you need to know to profit at Indiana Commissioners sales. Even if you don’t plan to come to Indiana to invest, pay attention because a lot of the principles here apply to most “second chance leftover” sales.
First, let’s talk about several reasons why Indiana Commissioners sales present a rare opportunity to actually buy at a public auction and still come out ahead if your goal is to acquire properties.
Inherent Reasons Indiana Commissioners Sales Are a Rare Opportunity to Acquire Property
I stay away from most tax lien sales because there is bidding competition and also a long wait period before I can acquire any properties. Plus, by the time the waiting period is up, my experience is that all worthwhile properties will have redeemed. Only the “needle in the haystack” liens remain unredeemed and lead to a windfall property acquisition.
However, Indiana Commissioners sales are different – and you CAN get a good deal on tax sale property (at a public auction) and in a reasonable time. Here’s why:
1. Reduced Minimum Bid – Indiana Commissioners sales are held to liquidate liens that did not sell at the regular tax lien sale.
Presumably, these properties were not worth even the amount of taxes owed in the eyes of investors at the original sale. Or, without seeing the property condition, the investors were not willing to take a chance that they would end up owning the property, even though it appeared to be a good property from the outside.
Since the lien did not sell at the original “treasurer’s sale” for even the minimum bid, the commissioners slash the minimum bid on the liens offered. This is simply to get the lien sold and to try to get the properties back on the tax rolls. Sometimes the new, lower minimum bid is as little as 10% of the original amount or $25.
Now, properties that were unprofitable before, become profitable. Or properties that weren’t taking a risk on, worth taking the risk! Plus you can buy more liens with the same amount of money, increasing your chances of getting some properties.
2. Owner Must Pay Full Redemption – Since the property didn’t sell at the first sale, even MORE taxes have likely piled up since then.
While you as a tax lien investor are offered an attractive, discounted minimum bid to get involved, the owner must pay the FULL amount owed plus penalties to redeem their property. With many installments now late, and fees piling up, it can be very difficult for them to redeem.
The result: Indiana Commissioners sales have a MUCH LOWER redemption rate than regular tax sales. Meaning, you have a much better chance of getting the underlying property for just the amount you spent on the lien.
3. Little or No Institutional Competition – Many large companies roll into town and bid on liens at the regular “treasurer’s sale” – and this pushes prices of Indiana tax liens to the limit of profitability.
These buyers largely do not attend Indiana Commissioner’s sales. This is because the institutional buyers usually DO NOT WANT properties and they know that a large percentage of liens “become” deeds when purchased at the Indiana Commissioner’s sale.
These buyers want to borrow money at 1-2%, earn 10% interest when their tax liens pay off, and move on. And they want to invest millions in one shot, which they can’t do at Indiana Commissioner’s sales because the value of the liens is much, much smaller than those offered at the regular treasurer’s sale.
4. Short Redemption Period – Perhaps best of all, Indiana Commissioners sale properties only have a 120 day redemption period. This is obviously a much more reasonable time to wait than the 1 year given to the owner in the regular sale.
Now you know the outcome of your investment sooner, and get your hands on any properties you acquire in a shorter time. Plus there is less chance that the property condition will significantly worsen during the redemption period, or that the real estate market will change drastically. These can be major problems with long-term lien investments of 1 year or more.
For those liens you buy that redeem nevertheless, you still get a full 10% return on the minimum bid over only 4 months if the lien does redeem. If I’m not going to get a property, at least 30% APR return helps ease the dissapointment.
5. Online Auctions – One more minor benefit is that many of these auctions are held online over a period of a couple weeks. So, you don’t have to travel to the auction but you still really need to come to the area to do due diligence on the liens you’re considering.
So there are the benefits of Indiana Commissioners sales, and why I occasionally break my “no tax lien auctions” rule and invest in them.
Nothing in this world is without downsides and traps, however – and we’ll talk about the dirty side of Indiana Commissioners sales in Part 2 of this series.
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