Minimum Bids At Auction

I found a city near me taht had a list of tax title auctions and the dates they would be held. Why do they have minimum bids of like $10,000 and $20,000? I am assuming they don't all owe that much in taxes, but is the city doing that to try to get more money for the city? I thought it should only be the back taxes that they auction off? I am a beginner so any info. is greatly appreciated. I am in Massachusetts and cannot find anyone that has experience in my state to learn from.

Hi,

The minimum bid is the amount that is due for back taxes, penalties, and fees, that have accrued during the default period. In California, the default period is 5 years before the property can be sold at the auction.

So you're talking about roughly 1% of the assessed value for taxes, plus anywhere from 12-18% in penalties of that 1% amount per year, and the administrative costs, for 5 years.

That amount will typically come to 7-10% of the assessed value, and is the basis for the minimum bid amount, which is exactly the same amount as the back taxes for 5 years, penalties, and costs.

At the auction, any excess amount over the minimum bid is set aside for rightful interest holders (lienholders that were wiped out by the tax sale) to claim, provided that they claim that excess proceeds. After 1 year, if there are any remaining excess proceeds, the county can appropriate that amount into their general fund account.

This is applicable to tax deed sales in California and might be different in your state.

[ Edited by lithiumcove on Date 02/13/2008 ]

[ Edited by lithiumcove on Date 02/13/2008 ]

Not all states are like CA. In MN--and, I'm guessing, MA-the bidding starts at "appraised value" which is generally their best guess at the least they'd take. It's left to the counties to determine. I got an older 3 BR house in a dying farm town a few years back for $100, rented it to the squatter who was in it for $200 a month the same day, not a bad day's work. I still own it. If Hampshire County can't sell it for the min, they might lower the min next year, or just wait out appreciation. Try some other counties, their policies might differ.

I don't know about your state, but it doesn't make sense that the bidding starts at the appraised value. And since when does the county concern themselves with appraised value?

They are only concerned with assessed value.

The process is pretty straightforward. For tax deed states, the statute allows the counties to convey the tax defaulted properties to a responsible owner so that property taxes can be collected. Nothing more.

Loon, you mentioned that in your state, the bidding starts at the appraised value, and you got a property for $100. Then the appraised value must have been $100 or less?

I should elaborate. By statute, bidding starts at appraised value, which has nothing to do with how much tax is/was owed. In practice, appraised value is what the county says it is. Some counties are aggressive (like my $100 house county) and start low, expecting to generate more interest in the sale; in my fluke case, that didn't happen. In most counties they often have to try several times to sell a parcel, as the bidding starts higher than any buyer wil bid. That's why there's not much reason to get excited about most MN tax sales; save for the flukes, there are rarely bargains. But since showing up is 90% of the game, the more you show up, the more deals you find.

Do we have anyone from AR here on the forum. Correct me if so. If memory serves me right, AR starts their bidding on properties at Taxes OR appraised value, which ever is HIGHER.

Last I checked (ten years ago) Hawai'i county started at taxes owed. With the lowest property tax rates in the nation, this meant you could get real bargains. Not $100 houses, but 25% of actual value was common and this was a boom time. And you get title. Cash on the courthouse steps- you bring cashier's checks of various denominations.

Chris

Loon:..

Where can I find the lien sale dates (and rules) for Minnesota Counties?

I'm interested in southwestern counties and , perhaps, Hennepin County.

Thank you.

[ Edited by Taxivestor on Date 03/04/2008 ]

Hi Guys,
Just wanted to update my findings since my original post. I did end up contacting my towns treasurer and had a very good conversation with her. She told me that in the 17 years she had been the treasurer that they have only had 2 houses sold at auction and most of the auctions were land. She also said they they start the bid at or near appraised value. She told me the mortgage company almost always steps in before that point and pays the taxes so they don't take second position and have a huge loss. She did tell me that each town or municipality has different rules though since Massachusetts is a hybrid state.