How Tax Lien Auctions Work: A Guide for Beginners | Propscout.ai

How Do Tax Lien Auctions Work?

Tax lien auctions are conducted by local governments to recover unpaid property taxes. During the auction, investors bid on liens, not the property itself. The winning bidder pays the back taxes in exchange for a lien certificate and the right to collect repayment from the property owner, usually with interest.

There are typically two types of auctions:

Live (In-Person) Auctions: Conducted at a physical location where participants bid in real time.

Online Auctions: Held through county or third-party websites, allowing remote bidding.

Each state has different rules governing how tax lien auctions are held, including bidding methods, interest rates, and redemption periods.

Common Bidding Methods

Bid-Down Interest: Investors bid by lowering the interest rate they are willing to accept.

Premium Bidding: Bidders offer to pay more than the lien amount; the excess may or may not be recoverable.

Random Selection: Used in some jurisdictions to randomly choose winning bidders among qualified participants.

What Happens After the Auction?

If you win a lien, you receive a tax lien certificate and wait through the redemption period. If the property owner pays back the taxes plus interest, you are repaid. If they do not redeem, you may begin foreclosure proceedings, depending on local laws.

Propscout.ai simplifies the auction preparation process by allowing users to:

View and filter upcoming auctions by county or state.

Analyze property data and lien amounts.

Export lists to spreadsheets or track them inside the platform.

Understanding how these auctions work is key to forming a sound bidding strategy and avoiding costly mistakes.

Continue reading to learn more about Research and Due Diligence, Preparing for an Auction, Post-Auction Procedures, and Legal Considerations in our Propscout.ai Tax Lien Investor Guide.