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May is the month for the Florida online tax sales, but there are a few problems with the online tax sales in Florida. The interest rate at the Florida tax sales is typically bid down to.25%, and Florida counties allow investors to have subaccounts, which give the institutional buyers a great advantage over the small investor. But even if you manage to buy a tax lien at a decent rate in one of the Florida sales, the redemption period is 2 years, and you may have to wait out the redemption period before getting paid on your lien. So how can you make money in the online tax lien sales without having to wait 2 years or more to get paid?
Everybody wants to know which states have the highest interest rates and the shortest redemption periods. Many are interested in redeemable deed states that have steep penalties, like Texas where the redemption period is only 6 months and the penalty is 25%, or Georgia where the penalty is 20% and the redemption period one year. But the problem with investing in these states is that they do not have online sales.
But there is one tax lien state that does have a short redemption period and online tax sales, and some of the counties in this state do have decent interest rates as well. The state that I’m referring to is Maryland.
Maryland tax sales take place in May and June each year and a few of them are online. The redemption period in Maryland counties is one of the shortest – only 6 months. The interest rate varies by county quite a bit, from 8% to 20% per annum! The county with the highest rate of return is Prince George’s County but they do not have online sales. The City of Baltimore and Howard County, however, do have online sales and have an interest rate of 18% per annum.
Bidding in Maryland tax sales is very different from bidding at tax sales in other states. In Maryland counties, premium is bid, but you do not have to pay the entire premium at the sale. What you pay at the tax sale is the certificate amount and a portion of the premium, referred to as “high bid premium.” High bid premium is 20% of the difference between the bid amount and 40% of the property value. So if you bid less than 40% of the property value you don’t have to pay any of the premium you bid at the sale. But you do have to pay all the premium bid if you foreclose on the property.
Maryland counties also charge a non-refundable fee to bid at the sale. These fees can vary by county from $100 – $150 dollars. Howard County has a $1000 deposit requirement instead of a registration fee and this is refunded if you do not have successful bids. If you are successful bidding then the deposit is applied to the amount due in order to pay for any liens purchased.