Whether you prefer tax liens or tax deeds you will find what you are looking for in Indiana. The tax sales in Indiana satisfy the needs of both the tax lien and the tax deed investor. In fact the ninety-two counties in Indiana are allowed to hold three different types of tax sales. The three types of sales are:
- Tax Lien Sale
- Commissioners Certificate Sale
- Tax Deed Sale
The standard sale that is held once each year in all ninety-two counties is referred to as the tax sale. The tax sale is the auctioning of tax lien certificates. The tax sales are typically either conducted live or via the internet. The individual counties make the determination as to which auction method they use live or online. A company called SRI Auctions conducts the majority of the tax sales in Indiana with the major exception of Marion County (Indianapolis) which conducts their own unique auctions. The terms of the tax lien certificate sold in Indiana are one year redemption with a 10% penalty on the opening bid amount for the first six months that increases to 15% between six months and one year. Some important key words in the previous sentence are "opening bid amount". Indiana uses a premium bidding method to auction tax lien certificates any amount paid over the opening bid amount is referred to as the premium or overbid. In addition to the penalty on the opening bid amount the property owner must also pay 10% interest per annum on the premium / overbid amount in order to redeem the tax lien certificate.
As a rule of thumb Indiana counties do not offer assignment purchasing, instead they hold a commissioner’s sale to liquidate county held tax lien certificates. The terms of a Commissioners’ certificate sale are different than the terms of the annual tax sale held by each county. The redemption period is 120 days rather than 1-year. There is a 10% penalty on the entire bid amount due at redemption rather than the graduated penalty and interest paid on a regular tax lien certificate. The redemption rate of commissioner’s certificates is very low; therefore you should treat a commissioner’s sale as if it were a deed sale. Remember in a deed sale you are purchasing the property, not a lien on the property. Even though technically when you purchase a commissioner’s certificate you are purchasing a lien the odds are very high that you will end up getting a deed to the property. In order to make a profit on a deed you will need an exit strategy for your investment.
The state of Indiana requires that anyone who invests in a tax lien certificate or a commissioner’s certificate send out notices to the property owners. Noticing on a tax lien certificate must be sent out between the third and ninth month. Notice on a commissioner’s certificate must be sent within thirty days of the certificate purchase. Full details of the noticing requirements can be found in the buyers handout provided at every property tax sale held in Indiana whether it is a live sale or online. Failure to conduct the required noticing will result in the loss of the tax lien on the property.
Some counties retain any unsold liens until the redemption period has expired. Once the redemption period has expired they go through the foreclosure process on the property and obtain a tax deed. After the county obtains a tax deed on the property they conduct a tax deed sale. At the tax deed sale the properties are sold to the highest bidder. If you are the successful high bidder at the tax deed sale you will receive a tax deed for the property giving you full ownership rights to the property. In most cases you will need to bring a quiet title action (a lawsuit filed to establish ownership of real property) to remove any clouds from the title before you can sell the property.
A number of U.S. Tax Lien Association clients have found success investing in Indiana. As always we recommend that you carefully follow the property evaluation steps taught by the U.S. Tax Lien Association prior to making any investments in tax liens or tax deeds.