Dear Premium member:

I am including some of the same information on Indiana sales that you received in March. It is important to understand the rules; however, also realize that the March sales were Commissioner sales and not the annual tax lien sales. The annual tax lien sales are going on now. Unfortunately, most of the sales are not online.

Nevertheless, if you have a reason to visit Indiana or live close by, I saw some great lists, which are all listed on the SRI Tax Sale website.

In fact, I went through the entire list of counties to find the best lists. Here are my favorite counties:

Vigo (1274 liens), Grant (1284 liens), Johnson (848 liens), St. Joseph (3978 liens), Porter (1268 liens), Clark (770 liens), Henry (802 liens), Howard (754 liens).

Visit this link:

Go to www.sri-taxsales.com, then click on the link at the top of the page that says Tax Sales and it will take you to this link: http://www.sri-taxsalesystem.com/Delinquent/ where you can search all the counties and all of the lists.

Hint: you can download the same file that is online into Excel format and screen the list much easier.

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.

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

A glossary of tax sale terms is included here:
Indiana Glossary

One of the most important concepts in tax lien investing is to be able to screen lists and come up with what you are potentially interested in buying. Screening will be slightly different for each list. That's because the lists are often quite different. The most common and necessary elements of a list are the following:

1. The number of the lien - starting with number 1 and going all the way to the end. One secret that I have learned is to work BACKWARDS. That's right. Start from the last lien and work toward the front. The reason is in any given sale, especially large sales, the most activity will occur at the beginning and it may wane as investors get tired, bored or run out of money.

2. The Parcel I.D. - in some cases, the Parcel I.D. will have meaning, based upon taxing jurisdiction, location, school district and a host of other things.

3. The Legal Description - by law the legal description and not the address is required. Consequently, some tax sale lists will only show Lot 25 of Block B of Parson Ridge Acres or the south 1/4 of the north 1/4 of the south 1/2 of Section 29, Township 45, Range 22. Of course, what you really want is 8349 NW Oak, St. Louis, Missouri so you can plug it into your GPS system and be on your way. Many counties will ablige and some will not.

To find the site address, use the Parcel I.D. and search the Appraiser's website. In a few cases, there will not be a site address.

4. Minimum Bid - the minimum bid or taxes owed is the most important part for the Tax Collector so they will certainly tell you what you are required to pay; however, there may be other fees or taxes that have to be included so be aware.

Potential Screening Methods:

Location
Location is also a great way to screen properties. If you are only interested in certain neighborhoods or you want to avoid others, then screen out your list using these criteria. You can search for properties within a given township, city or zip code. Scan through your list and look for city names, street names or other locations you recognize or don't want to be a part of.

Value
Screening by Assessed Value or Minimum Bid is a great way to remove less desirable properties with little value. For example, an assessed value of $100 indicates to me that the property probably has little value. It is most likely a small lot or piece of land in an undesirable location. As a check, pull up one of these properties in the report and see if a value is listed under the "REALIMPROV", which stands for real estate improvement or house. Land will have no improvement value.

This may seem obvious, but one of the first things you have to do is screen out any properties or liens that COST TOO MUCH. What I mean by that is to compare the taxes owed or minimum bid witht the county's value of the property. If a property has $3,500 in outstanding taxes and fees, then the minimum bid will be $3,500. So, what is the property worth? Well, amazingly you will find situations where a $3,500 lien is placed on a property (usually land) that is only worth $2,000. This is perhaps the easiest screen of all.

If it is not worth the money, then don't buy!!!

Even with a lien, you could get lucky and the lien would be redeemed, but what if you have to foreclose on a property worth only $2,000 and you paid $3,500 plus now you'll pay more in legals fees. Chances are you will have at least $5,000 into and it could be better just to walk away from the deal or let the lien expire.

Property Owners

Who owns the property?

I happened to look at one of the lists in Dekalb County, Indiana and I saw a company I recognized. After doing more research, I was convinced to stay away from this particular property. All it took was a few simply "Google" searches to know that the lien would probably wind up in bankruptcy and the whole process would be slowed down dramatically.

Also, have you ever looked at a list and you keep seeing the same name again and again? This could be a developer that's gone under or an investor in trouble or even a local family going through hard times. This is worth checking out. It's better to place quick phone call with the County and ask a few innocent questions, than deal with problems later.

Experiment with various searches and notice the links on the right hand side. The report link will show you the general information for the property. This is the kind of information that you will normally search for at the county assessor's office or website. In this case it has been provided so we are one step ahead.

Important! Due diligence is done after you have screened your list down to a manageable level.

Remember the 3 Most Important Resources

1. The Tax Collector or Treaurer's Website (including the online auction company)
This is where you get the list, find out about the sale, start your research and purchase your liens or deeds. Online auction company merely act to help the Tax Collector. Go to your favorite search engine and type in the specific county you are interested in, such as Vigo County Indiana Web Site or go to www.naco.org, click on About Counties, go to the State map, click on Indiana and search for Vigo County. Then, click on the website link and go to the main county website. Search for Department or Local Government and you will find the Tax Collector or Treasurer. From the main website you can navigate to the Appraiser's website and the Recorder or Clerk's website.

2. The Appraiser's Website
This is where you find out about a property's value, if not given already. Start by using the Parcel number. Parcel numbers can be tricky to use so you may have to search using the site address, owner's name, etc.

3. The Recorder's Website
This is where you look up other liens or problems. Start by finding the Grantor/Grantee index and search using the property owner's name. Note: you do not search using the property address. This is based upon the owner's name. There may be more than one owner or the owner could be a business, trust or other entity.

When it comes time to purchase you should remember in Indiana that you earn interest on the bid up so if you have found a lien on a property of value, then the idea is to bid it up enough to win the bid, but not so much that if you have to foreclose on the property, you paid too much.

The key here is to set boundaries. You want a good deal and you want to leave plenty of room for making mistakes. Everyone is different, but I personally do not bid over 50% of the value because I want plenty of room for a good deal. With competition down and the number of liens and deeds up, you may want to consider bidding much lower - 10% to 20% over the mimimum for example.

It is important to remember that your liens have a redemption period. You have to maintain your liens and pay subsequent taxes to maintain your first position. If your lien is not redeemed, you will need to keep track of any expenses related to foreclosing.

Plan on setting up a filing sytem, both physically and electronically. We'll talk more about this very soon.

Okay as a treat we will be profiling how to purchase through assignment, which is another way of buying online or through the mail or selling your own liens. Part two of this report will profile how to Buy Ohio Tax Lien Certificates through an online assignment process.

We'll send out a separate email when Part 2 is finished (most likely tomorrow). I think you will enjoy it. I was not even aware of this online resource until today.

All the best,

Michael