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Cook County IL Tax Lien Auction: 0% Bidders |
Rusalka
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Posted: 19:08 on 06-15-2005
I went to the cook county tax lien auction about 5 years ago as an observer, and I was shocked to find that only one of two things happened:
1. No one bid on a property.
2. Everyone in the room jumped out of their chairs and shouted "0"! at the same time when a property was called. The auctioneer picked winners at random.
There was no bidding down at all!
The frustrated auctioneer noticed me standing silently at the back of the room and even asked me if I was interested in bidding. Of course, I was just an observer, so I couldn't bid even if I'd wanted to. At least I know he was trying to be fair.
So the burning question is: what do people get out of bidding 0%? Is there some additional obligatory fee that you get when a property owner redeems the property? If most property taxes get redeemed, then why would everyone bid 0%? Even if they are professionals, what do they gain by tying up a large sum of money for a possible two years at 0% interest??
I hope someone can help me because I haven't found the answer to this question anywhere. The books I've read all assume the final bid will be *something* other than 0%, and never entertain the possibility, and therefore don't tell you why someone would bid 0%.
The tax sale is coming up again, and I'm interested in trying my hand at it. I suppose the best strategy is to go for properties I think won't be redeemed, but what are those? I have noticed a lot of properties owned by builders and developers and banks where the taxes haven't been paid. What about condos? Most of the individuals on the tax sale list own condos, not residences. Are these a bad deal?
I suppose bidding 0% on anything owned by an institution is a really bad idea, since most of them will redeem their taxes, right?
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mrmark
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Member Since: 01/03/2004
Prospect Heights, IL
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Posted: 20:08 on 06-15-2005
Hi,
If your looking to go this route look at the "collar"
counties - kendal/mchenry/will counties. NOT COOK OR DUPAGE! The competiton in the collar counties is
nothing like Cook/DuPage. Plus, the growth is in the collar areas, NOT in the 2 biggest counties. There's a 50% growth in people by 2030, in the collar areas. Not the case in the 2 biggest. The potential opportunity is decreasing each sale in the collar areas, yet there's some opportunty still there. Pricing for land in the collar areas is growing @ 10-20% a year. Try one of these tax sales - it's a lot more interesting. Mark 
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Rusalka
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Posted: 20:53 on 06-15-2005
Yes, well, but I know Cook County (and Chicago in particular) the best, so that's where I want to start. Besides, the collar county sales have already taken place in the last month or so, so that opportunity is gone for a year. The only way I would bid on a tax lien in the collar counties is if it were a farm or something. Those far-flung cookie cutter tracts are just too undesireable in my opinion. The whole real estate market in the suburbs could crash in 2 years. Who wants to own a house made of cardboard on a tiny piece of property that costs an arm and a leg to commute from? Do you know what the price of oil is going to be like in 2 years?
My question about why professionals would bid 0% still stands. Does anyone have an answer?
From my past experience detailed above (when I wasn't even qualified to bid) I know that I would get a random win along with all the "professionals" in the room while bidding. I can't bid on a whole bunch of things anyway, so I have to narrow it down to a few choice properties, and maybe I'll get one or two. I have the list and I can look everything up online, including the deeds recorded at the recorder of deeds since 1985, as well as the description of the property at the assessor's office, so this gives me a big advantage on doing my due diligence compared with other counties.
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sjhartless
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Member Since: 06/15/2004
Show Low, AZ
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Posted: 14:40 on 06-22-2005
In my area bidders bid -0- on bare land. I have thought about this a lot too and I am sure that they think they will be getting the land. But the land does not seem that desireable to me. Way out, no utilities, bad roads. However, recently there was an auction in our capitol, a company was auctioning off this same type of land and they were offering to carry the note. So I think that this is where the land is winding up and their return is the interest on the carried note. Kind of a roundabout way to a profit. But a good way.
Also I know a guy that was planning on getting the properties and selling them on Ebay, after full disclosure of where and what they really are.
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techfella
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Member Since: 07/16/2005
Chicago, IL
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Posted: 13:19 on 07-16-2005
A tax sale is a periodic government auction where individuals bid on the interest rate they are willing to receive if they pay off the delinquent taxes on specific pieces of real estate. At a tax sale people are actually biding on the amount of interest they want to receive if they pay off a homeowner’s delinquent taxes.Usually when a tax certificate is redeemed, the tax purchaser at a tax sale can expect the amount of money they paid plus the cumulative annual percentage rate they successfully bided at the tax sale. Generally, the percentage rate at tax sales can range from as low as 5% and as high as 30%. Bidding "0" is just a stratgy to gain position on a property. Anyone bidding higher would lose out. Tax sales are an excellent source of investment, however there are primary two potential problems with how they work:
1) A homeowner who has their property taxes auctioned off at a tax sale my never actually pay their property taxes; which means the successful bidder potentially may never get any money back.
2) Every year there are millions delinquent property taxes that are available at tax sales that are never purchased.
The solution to the first problem is that that the holder of a tax certificate can acquire ownership of the property through a lawsuit if the original homeowner does not pay their property taxes off in a certain time frame. This may cost a few thousand dollars but is well worth it because the property is usually worth a lot more. The solution to the second problem is where the SCAVENGER SALE comes in.
After a property has appeared at a certain number of tax sales and it’s property taxes have not been purchased the government then auctions off the actual property to the general public. The beginning bid for properties at scavenger sales is not based on the market value of the property, but rather on the unpaid delinquent tax amount or accessed value of the property. A successful bidder at a scavenger sale will receive an actual deed to the property.
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carraras
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Member Since: 09/23/2005
Charlotte, NC
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Posted: 16:52 on 09-23-2005
What websites are available for the "Collar" counties?
----------------Quote--------------------------------------------
I have the list and I can look everything up online, including the deeds recorded at the recorder of deeds since 1985, as well as the description of the property at the assessor's office, so this gives me a big advantage on doing my due diligence compared with other counties.
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MarleneM
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Posted: 23:16 on 09-29-2005
So where can I learn more about scavenger sales? I Googled the term and only saw some scheduled for Cook County, Illinios 
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diner
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Posted: 14:17 on 06-22-2006
I just returned this afternoon from the Cook County Tax Sales and I confirm with you that all of the bids were 0% with the exception of very few (3) at 18% where only one person bid.
I don't understand why anyone, including the large financial institutions, would bid at 0 interest. They say the percentage of properties that you could own due to failure to pay off the taxes is less than 2%.
Sounds like the stock market or mutual funds might be a better place to invest... even Emigrant Direct pays a 4.65% on a savings account.
So I, too, am asking WHY WOULD YOU BID 0% (when you most likely will NOT gain the property)????
[ Edited by diner on Date 06/22/2006 ]
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SLenzen
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Minneapolis, MN
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Posted: 20:12 on 06-22-2006
That is strange. Maybe its the same scenario as when people bought dotcom stocks for $100 w/ no earnings and barely any real revenue. A speculation frenzy? They must be thinking there is enough potential property value to take the risk. There must have been a real estate guru seminar in town recently 
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cherdwelth
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Phoenix, AZ
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Posted: 00:14 on 06-28-2006
I'm not sure why anyone bids the 0% - but if you think you'll have trouble buying tax liens for investment you might try this:
Wait until after the sale when all the "unsold" properties are offered - the ones the state must buy. Then look through them and buy them. I think you will get the top % on them. They are usually available for sale throughout the year.
In the meantime, I wrote our state treasurer. Let's see if he gives me any info.
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cherdwelth
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Posted: 12:11 on 06-28-2006
Okay - I got a response from our State Treasury Department and it said this about why bidders will pay 0% interest on a tax lien certificate auction:
"For the most part, it is when the lienholder WANTS the property, not only the interest."
So it seems if the property is HOT - - they'll bid the zero percent just to have their name on the property just in case the taxpayer defaults.
[ Edited by cherdwelth on Date 06/28/2006 ]
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StatHaldol
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Monroe, LA
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Posted: 16:52 on 06-28-2006
I buy tax liens in Louisiana. The competition has become so intense over the last couple of years that I haven't gotten a tax lien in over two years. People here get caught up in the bidding process and bid the interest rate down to unrealistic percentages.
Just my opinion,
Mike in Louisiana
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ocraig
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Posted: 17:58 on 08-22-2006
In Illinois, a bidder will bid 0% for one of two reasons:
1) Numbers game, they have alot of money and the property is desirable. If you buy a couple hundred liens, several of them may fall through the cracks.
2) Subsequent tax years. After one buys a tax lien in Illinois, that individual/company has first option at subsequent tax years at a flat rate of 12% a year. This is without competition.
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buradoro5
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Posted: 22:45 on 08-02-2007
On the Cook County Assesor's site FAQ section, it states:
"Tax Buyer: the individual or entity that purchased the taxes at an auction conducted by the Cook County Treasurer's office, or purchased over-the-counter for forfeited taxes that were offered and not sold at the annual sale. The tax buyer acquires an interest in the property which can lead to a loss of the property if the taxes are not redeemed within the redemption period. Interest can be as high as 36 percent per year in addition to the statutory 1.5 percent interest per month on unpaid taxes."
Note the words "in addtion to"
So does this mean that even if the bidders bid the 18% opening rate down to 0%, they still will get 1.5% interest per month?
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SHEBAY21
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Posted: 11:59 on 11-14-2007
Here is my theory to the 0%... As you know Cook County has several seedy areas but decent houses. I know this because I once lived in Cook county. My theory is this. RESCUE MISSIONS... In a nut shell rescue mission people offer to help people in need. When you get so far into debt, these people come along and offer you a way out. Usually at this time people agree to anything to save their credit and think they will have a place to live or money for a new start.
Usually when someone doesn't pay for their tax they don't pay their mortgage either. So these people will tell them that they will pay their back mortgage payment and if they have a 2nd will call that bank and neg. a buy out price using a pending foreclosure as their in. Now banks want to neg. because, In a foreclosure, anything after the 1st mortgage gets wiped out. They want to recoup at least some monies.
Needless to say they buy their taxes back a 0% pay off the taxes in the redemption period. Fix their house and resell it.
In other words a person who is forclosing on their house--walks out with nothing. If someone rescues you-- this is the seniaro
Your house is worth $150,000 they will pay off back mortgage, taxes and fix your house and charge interest, they will probably put in 50,000 or so at this point. They are going to take that off the top of the sale and split the difference. Rescue team has now gotten their 50,000 rehab plus another 50,000 from the split and the homeowner receives 50,000 to start all over. I know this may sound unfair but as I stated above if the homeowner forecloses they walk out with $0.00 and horse shit credit!!
This may seem far fetched and I am a beginner as well doing my due diligence but wouldn't this make sense to do if you were a rescue mission person?
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