What does Bid Down mean in reference to Tax Lien properties?

Answer 1

Do you mean bidder down? if that is the case it means the next highest bid.

There are 5 types of bidding systems when bidding on tax liens...

1) Bid Down the Interest - means that the state sets a maximum interest rate for bidders at the auction, but bidders may bid a lower amount acceptable to them. For example, the maximum interest rate may be set at 18%, the bidding will start at this rate and bidders will "bid down" the interest until there is a winning bid. Sometimes liens can be bid down as low as 1/4 percent.

2) Premium Bidding - occurs when the lien is awarded to the investor bidding the highest premium above the lien amount. For example, on a $600 lien, the winning bid may be $1000 ($600 lien + $400 premium). However, check with that county to see how they will handle the interest rate for both the lien and the premium (sometimes you don't get the same interest rate for both).

3) Random Selection - county official randomly selects a bidder number and to see if that investor wants that particular lien. If that investor does not want the line, the official will randomly pick another investor, and so forth.

4) Rotational Bidding - all investors receive the same number of chances to purchase a lien. The county official will offer the first lien on the list to bidder #1, then the second lien is offered to bidder #2, and so forth.

5) Bid Down the Ownership - investors bid down how much of the property the lien will encumber. For example, an investor may buy the lien accepting an encumbrance on only 50%, 25% or even 1% of the property.

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