If you are considering investing in tax lien certificates in Indiana, there are a few things you should know. The most important clarification to be made is that you are not buying the property, only a lien against it. Many investors mistakenly think they can go into the auction and walk out owning a new piece of property, but this is not the case in Indiana. Indiana is a tax lien state, not a tax deed state, which means the actual properties are not being sold. However, there is a chance you will end up owning these properties, so if that is what you wanted, you are in luck.
The process is somewhat tricky, but here is an overview of what happens. First, property owners are required to pay property taxes, when they don’t for over a year, the tax liens are added to the auction list. At the auction, the tax lien certificates are sold to the highest bidder, the minimum price is calculated by adding together all of the taxes due, penalties, and other charges. After the auction the winning bidders are required to pay for their purchases, the payment is usually required in cash or certified check before leaving the auction site, so be prepared to pay right away. Once they have paid, the investors will be presented with their newly acquired tax lien certificates.
There are two outcomes for tax lien certificates. The most common outcome is redemption, the property owner will pay for their taxes and penalties and the investor will collect their money plus interest. In Indiana the interest is computed through several calculations. First, a percentage of the minimum bid is added on, if redeemed within six months of the sale it is 10%, after 6 months it is 15%. In addition, 10% per annum is paid on any additional amount paid, known as surplus. The property owner does not have to pay back the surplus amount, which will be refunded from the county. If the lien is redeemed, the investor gets their profits and is done with that lien, however it is possible that the lien is not redeemed within the one year redemption period and then the investor may be able to obtain the rights to the property.
After the one year redemption period is up the investor can petition the judge to get a tax deed. Tax deeds are usually awarded as long as all proper notification procedures were followed. It is important to make sure you adhere to the notification requirements to make sure you can successfully redeem your tax deed. Tax lien certificate holders are required to obtain a title search on the properties they have liens on. Then, based on the title search they must notify all parties with an interest in the property of the right to redemption. The title search may not be performed until at least 30 days after the auction and the notifications must be completed within 9 months of the sale. It is recommended that an attorney be hired for these tasks to make sure they are properly carried out so the tax deed can be awarded.
The world of tax lien investing is a mysterious place, but with some guidance and a good strategy there is a lot of money to be made.