How to Prepare for (OTC) Over-the-Counter Tax Sales

How to Prepare for Over-the-Counter (OTC) Tax Sales

When preparing for Over-the-counter (OTC) tax sales, the first step is understanding that these are opportunities to purchase tax liens or tax deeds on properties not sold during the auction. Whether you’re aiming to earn interest from delinquent taxes through tax liens or seeking full ownership with tax deeds, OTC sales offer a simpler, non-competitive option. However, proper preparation and research are crucial to make informed decisions and avoid potential risks. Here’s a guide to help you navigate the OTC process effectively.

1. Understand Your Investment Goals

Before diving in, it’s essential to clarify whether you’re interested in purchasing tax liens, which allow you to earn interest, or tax deeds, which can result in property ownership. Decide whether you are focusing on:

• Residential homes, vacant lots, or commercial properties.
• Properties with development potential or those that need minimal maintenance for resale.

By defining your goals, you can focus on properties that fit your investment strategy, whether you’re interested in earning interest or foreclosing on properties.

2. Choose the Right State and County

Each state and county has its own rules for (OTC) Over-the-counter tax sales. Some popular states for OTC investing include Florida, Arizona, and Texas, where unsold properties become available after the auction. You’ll need to research which type of opportunity is available in your target location:

• Tax liens: You collect interest on delinquent taxes until the homeowner redeems the property.
• Tax deeds: You can acquire the property if it goes unredeemed after the redemption period.

Make sure to investigate the specific rules and procedures for each state and county. Some states, like Florida, offer online OTC purchases, while others require in-person transactions.

3. Obtain the Over-the-Counter Tax Sale List

Once you have chosen a state or county, the next step is to get the OTC list. These lists include unsold tax liens and tax deeds detailing the properties available for purchase. Here’s how you can access these lists:

• Online Access: Many counties post their OTC lists on their websites, which are often labelled as county-held certificates for liens or county-held deeds for tax deeds.
• Request by Mail: Some smaller counties may require you to request the list directly from the tax collector’s office, sometimes charging a small fee.

The list typically includes details about the property, its location, and the outstanding taxes or fees, allowing you to perform due diligence before making a purchase.

4. Perform Due Diligence

Both OTC tax liens and deeds carry risks, which makes research critical. Whether you’re buying a lien or a deed, here are a few key things to investigate:

• Property Condition: Some properties might be damaged, landlocked, or located in undesirable areas like flood zones. Be cautious of properties that have been on the OTC list for a long time, as they may have hidden issues.
• Legal and Title Issues: Make sure to research the property’s title for any additional liens or disputes. Buying a tax deed might give you ownership, but it doesn’t guarantee a clean title.
• Zoning Restrictions: Ensure the property complies with zoning laws. A vacant lot might seem like a bargain, but it may not be buildable due to zoning restrictions or environmental hazards.

For tax liens, research the likelihood of the homeowner redeeming the property and paying off their debt. For tax deeds, ensure you understand the full cost of owning the property, including any outstanding fees or maintenance costs.

5. Make Your Purchase

After performing thorough due diligence, you can proceed with your purchase. The process differs slightly between liens and deeds:

• Tax Liens: You’ll pay the outstanding taxes, and the county will issue a tax lien certificate. This entitles you to collect interest until the lien is redeemed. If the property owner fails to redeem, you may foreclose on the property.
• Tax Deeds: You’ll pay the amount due and receive a deed to the property. However, you might need to take additional steps to clear the title, such as going through a quiet title process.

Some counties allow these transactions to be completed online, while others may require you to mail in payment or visit the office in person.

Benefits of Over-the-Counter (OTC) Investing

• No Auction Pressure: You don’t have to worry about competitive bidding at a live auction. You can review the available properties and make a decision without rushing.
• Fixed Interest Rates for Liens: Unlike auctions where rates can be bid down, OTC liens typically offer the maximum interest rate allowed by law.
• Potential for Property Ownership: With tax deeds, you can take full ownership of the property, often at a fraction of its market value.

FAQs on OTC Tax Lien and Tax Deed Investing

• What is the main difference between OTC tax liens and tax deeds?
  Tax liens allow you to earn interest on delinquent taxes, while tax deeds give you ownership of the property if the homeowner doesn’t redeem.
• Are OTC properties cheaper than auction properties?
  Yes, they often are. OTC properties don’t have the competitive bidding of an auction, and the price is usually set at the amount owed in taxes, interest, and fees.
• Can I invest in OTC liens and deeds from home?
  Yes, many counties offer online purchasing options, so you can buy tax liens and deeds without attending an auction in person.

Conclusion

OTC investing in both tax liens and tax deeds offers a convenient and often less competitive way to enter the real estate market. By doing thorough research and staying patient, you can find lucrative investment opportunities. Whether you’re looking to collect interest or acquire properties, OTC tax liens and deeds can be a smart addition to your investment portfolio.

Ready to dive into OTC tax lien and tax deed investing? Don’t miss out on lucrative opportunities that can boost your investment portfolio. Start exploring the OTC lists in your preferred state or county today. If you’re unsure where to begin or need more guidance, book a consultation with us. We offer personalized advice, resources, and strategies to help you make informed decisions.

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