Indiana is one of my favorite states for tax lien investing. Every year Indiana conducts tax lien sales from roughly August through October, depending upon the county. Several of the Indiana counties have gone online and their service of choice is SRI.

Any tax liens that are not purchased at the regular sale are made available through the Commissioner's sale. Before I discuss this sale, I would like you to understand the tax sale laws of Indiana.

TAX LIEN CERTIFICATE SALES

The public auction or "Tax Sale" of real property is required by Indiana law. The statute governing tax sales in Indiana is Indiana Code (I.C.) 6-1.1-24 and 25. The law requires:


The law allows the County Auditor and County Treasurer, who are responsible for the tax sales, options regarding the manner in which the tax sale may be conducted. Therefore, the exact procedures by which a county conducts a tax sale for properties with delinquent taxes and special assessments may differ from county to county.

Tax Sale Date: Typically, tax liens are sold once a year and the sales can be held any time during a year, based upon the first collection of taxes. Indiana law requires the County Treasurer to provide to the County Auditor on or before July 1st a list that certifies all tax sale eligible properties as of that date. Tax sale eligible is defined as any entity that is delinquent from the prior year’s spring installment. Tax sales must be held no later than 171 days after the list is certified to the County Auditor.

Eligibility: A person (or an agent of a person) who owes costs directly attributable to a prior tax sale, delinquent taxes, special assessments, penalties, or interest may not purchase property in a tax sale other than their own property (I.C. 6-1.1-24-5.3[a][5]).

Bidding Process: Indiana is a bid-up state. In otherwords, you start bidding at the minimum bid and increase your bid until you win. For online auctions it is typically done by proxy, meaning that you can set your bid at your maximum and the program will bid for you in the required increments until you win. If you are outbid, you will be notified and have a chance to increase your bid.

Minimum Bid: Property at the sale will not be sold for an amount less than:

• the delinquent taxes and special assessments on each tract or item of real property,

• the taxes and special assessments on each tract or item of real property that are due and payable in the year of the sale, whether or not they are delinquent,

• all penalties due on the delinquencies,

• an amount prescribed by the county auditor that equals the sum of:

• the greater of twenty-five dollars ($25) or postage and publication costs; and

• any other actual costs incurred by the county that are directly attributable to the tax sale, and

• any unpaid costs due under subsection (b) from a prior tax sale. (IC 6-1.1-24-2[a]).

Redemption Period: The redemption period for A items (properties not in the last year’s sale) is one year after the date of the sale of the certificate (I.C. 6-1.1-25-4[a]).

Subsequent Taxes: During the period between the tax sale date and the expiration of the redemption period and prior to the issuance of a deed, the certificate holder may pay all taxes, assessments, penalties and costs due for the property. Immediately upon paying for any of these additional costs, the certificate holder should report the payments to the County Auditor's office with the receipts to record them. The certificate holder can be reimbursed for those taxes (plus interest at the rate of 10% per annum) upon redemption if he files a 137B form.

Redemption Fee: The redemption fee is calculated in two parts (three parts if taxes are paid subsequent to the tax sale):

1. On the Minimum Bid:

• 110% of the minimum bid if redeemed not more than 6 months after the date of sale

• 115% of the minimum bid if redeemed more than 6 months but not more than one year after the date of sale.

2. On the difference between the successful bid price and the minimum bid (referred to as tax sale overbid): 10% per annum interest from the date of payment to the date of redemption.

3. On any taxes and special assessments paid by the certificate holder subsequent to the sale: 10% per annum interest from the date of payment to the date of redemption.

4.5 and 4.6 Notices: Not less than three months prior to the expiration of the redemption period (12 months from the date of sale), the certificate holder must send a Notice of Sale by certified mail to the property owner and any person with a substantial interest in the property. The Notice must include all the information required in I.C. 6-1.1-25-4.5. These notices are referred to as “4.5 Notices.”

It is typically recommended that the certificate holder initiate a title search on the property to identify the legal owner and any persons with a substantial interest of public record prior to sending this notice by certified mail. If the property is redeemed, the property owner will be required by law to reimburse the certificate holder for her actual paid title search expenses, not exceeding the amount established by the county, if a form 137B was filed with the County Auditor prior to the date the property owner redeemed the property. Indiana law does allow the certificate holder to file a request with the court to be reimbursed for an amount greater than the ceiling set by the county for title search and noticing and attorney fees.

The certificate holder is further required (by I.C. 6-1.1-25-4.6) to send a “4.6 notice” to the interested parties after a year from the sale to notify them that the redemption period is over and a deed petition is being filed.

Filing Deed Petition: If the property has not been redeemed, the certificate holder must petition for a tax deed to the real property within six months after the expiration of the redemption period. If the tax lien purchaser fails to do so, the lien against the property is terminated according to I.C. 6-1.1-25-7(a).

All delinquent taxes, penalties, and/or special assessments which became due subsequent to the tax sale must be paid before the County Auditor will petition the court to issue a tax deed to the certificate holder.

Penalties for Failure to Comply with Tax Sale Statutes: There are three important penalties to bear in mind:

1. Failure to Pay Amount Bid: A high bidder who fails to pay the County Treasurer in a timely manner the full bid amount for the subject property, in acceptable funds, will have his bid cancelled and be required to pay a penalty of 25% of the amount of the bid, subject to prosecution (I.C. 6-1.1-24-8).

2. Failure to Give Adequate Notice to Owner: A certificate holder who fails to fulfill the requirements for issuance of a court order directing the County Auditor to issue a tax deed (i.e., fails to give adequate or timely notice or provides insufficient supporting documentation) may be required to pay a penalty equal to 25% of the purchase price. The certificate holder’s petition for a deed under I.C. 6-1.1-25- 4.6 also may be rejected.

3. Failure to Give Notification and/or Petition Court: A certificate holder who fails to provide notice or provides insufficient notice as required by I.C. 6-1.1-25-4.5 (i.e., fails to notify the property owner and persons with a substantial property interest of public record to the tax sale and date of expiration of the period of redemption) may be required by the court to pay a penalty equal to 100% of the purchase price.

COMMISSIONER’S SALE OF TAX LIEN CERTIFICATES

Properties that do not sell at the regular, "A" tax sale in the fall have a tax lien certificate issued to the County Board of Commissioners. Indiana law allows the Commissioners to sell the tax lien certificates, convert certificates to a tax deed, or do nothing with the certificates. A second sale of certificates is called a “B” or “expedited” sale. The reason it is referred to as an “expedited sale” is that the period of redemption is shortened to 120 days from the date of the sale of the certificate for the property owner, and the buyer can receive their tax deed more quickly. (The redemption period of “C” items, which are marked for redevelopment, is also 120 days.)

I.C. 6-1.1-24-6.1 authorizes the Commissioners to sell a tax lien certificate at a “B” tax sale for an amount that is less that the amount required at the “A” tax sale.

COMMISSIONER’S County-Owned Surplus Sales

If a parcel has gone through the annual tax sale and is not purchased, the county takes a lien on the property. As discussed above, the County Board of Commissioners may sell these tax lien certificates at a second, “B” sale.

Alternatively, the county may take title to any property for which it holds a tax lien by virtue of a tax title deed, following the same procedures as a lien buyer. (The County Commissioners may request a tax deed from the County Auditor 120 days after the tax sale ends.) The property is appraised and a minimum bid amount established.

At the auction, bidding starts with the minimum bid, with the highest bidder winning the property. There is no redemption period at a surplus auction.

No property may be sold to a person who is ineligible under I.C. 36-1-11-16. This means that anyone who is purchasing property previously held by them or by their principal and that was forfeited because of delinquent taxes within the last five years, must submit timely payment to the County Treasurer of all past due amounts.

The property is conveyed from the county to the winning bidder by quitclaim deed, which the county records. The parcel is owned by the buyer as soon as she receives the recorded tax deed. Under a new law in 2007, however, buyers will not be issued a deed until any delinquent property taxes are made current on property they currently own. Failure to bring all delinquent property taxes current may result in the voiding of sale of the parcel, application of money rendered to the delinquent taxes, and the resale of that parcel in a subsequent sale.

According to state law, the tax deed vests in the grantee an estate in fee simple absolute, free and clear of all liens and encumbrances “created or suffered” before or after the tax sale except those liens granted priority under federal law and the lien of the state or a political subdivision for taxes and special assessments which accrue subsequent to the sale and which are not removed by state law.

The property is, however, subject to:

1. all easements, covenants, declarations, and other deed restrictions shown by public records
2. laws, ordinances, and regulations concerning governmental police powers, including zoning, building, land use, improvements on the land, land division, and environmental protection
3. liens and encumbrances created or suffered by the grantee.
   

According to state law, the tax deed is prima facie evidence of valid title in fee simple in the grantee of the deed. It is also prima facie evidence that the sale of the real property described in the tax deed was not irregular, and that all proper proceedings were conducted in a regular manner.

The most recent update of the Indiana Tax Sale Laws is presented here:
Indiana Tax Sale Laws (pdf format) - updated for 2010

Step 3: Rules of the Sale