Through the Grape Vine

This a systematic form of tax lien auction. The auctioneer gives the first bidder a chance at the lien and then makes his way one-by-one down the line until someone agrees to the terms. Then the process begins anew, this time starting with the second bidder so that the each investor eventually gets an opportunity at first dibs on a tax lien. The secret here is to go to auction that are poorly attended. If there's a large group of investors in attendance, and you find yourself at the end of the line, you can imagine how dismal your prospects become.

Beware the Amazing Shrinking Encumbrance

Obviously, you want to get the best deal you possibly can for yourself. This last form of auction does not give the investor the advantage. They leave you at the mercy of the owner's decision to pay their accrued taxes or relinquish their home. Tax liens cover 100% of the property's cost. In a shrinking encumbrance auction, that percentage dwindles. You will still earn interest if the owner does redeem their home. But if the property goes into foreclosure, you will only own a percentage of the property, and that equals a foreclosing nightmare for you. Do not be tempted into bidding at an auction of this nature. It is just not worth it.

Don't be caught off guard. Before you make any bid, you need to not only know what type of auction you are participating in, you need to know the nuances of that auction form like the back of your own hand. If you do, you can be assured of a rewarding and enjoyable investing career.

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