Tax Lien vs Tax Deed and the Cycle of a Tax Deed Auction
Each year, people fall behind on their property taxes. In Florida, around June, the county auctions off Tax Liens. These are certificates on which people bid on the lowest interest points. The person who wins the tax lien auction pays the delinquent property tax to the county. The owner of the property still owns the property, but now, when/if they pay their delinquent property taxes, the Tax Lien Certificate Holder is paid their original investment plus the interest (The property owner has redeemed their property). The buying of these tax certificates is known as Tax Lien Investing.
If, after 2 years (but before 7 years), the property owner does not redeem their property, the Tax Certificate holder can apply for a Tax Deed. The property will now be set up for sale at a Tax Deed Auction. The starting bid is always at least the amount of the delinquent taxes, plus interest, and any fees the county incurred setting up the auction. If the property is homestead, half of the value of the property is also added to the starting bid (but that 1/2 amount will still be considered surplus later – more on that later)
The winner of the Tax Deed Auction now owns the property.
Here is the Tax Lien and Deed Cycle
| Each year, property taxes are due on April 1. If they remain unpaid, the county puts them into a Tax Lien Certificate Auction. |
| In May or June, the county will hold the auction. Bidders bid on a percentage of interest they are willing to accept. The winning bidder pays the late property taxes. When/If the property owner redeems (pays their late taxes), the Certificate Holder receives their original investment plus the percentage points they bid. Once a Tax Lien Certificate is issued, the certificate holder has to wait at least 2 years (but no longer than 7 years) to file an Application For Tax Deed. |
| If the property taxes remain unpaid in those years, a Certificate Auction is held each year and there are new high bidders, so there are typically multiple Certificate Holders. Any one of them can file the Application For Tax Deed, which will force the county to schedule a Tax Deed Auction for that property. |
| The starting bid of the property includes all of the property taxes owed, plus various fees from the county. If the property has a Homestead Exemption (the property owner actually lives in the home), then half of the assessed value is also added to the starting bid. |
| If there are No Bids in the 1st auction, the Certificate Holder has the option to pay the starting bid and receive a Tax Deed for the property (they would now own the property). They have 30 days in which to do this. If they do not pay, the county will schedule a 2nd auction within the next 30 days) |
| If there are No Bids in the 2nd auction, again the Certificate Holder has the option to pay the starting bid and receive a Tax Deed for the property (they would now own the property). They have 30 days in which to do this. If they do not pay, the property goes to the “Lands Available”. |
| Each county maintains a “List of Lands” or “Lands Available for Taxes” where anyone can purchase it for the amount of taxes owed, plus various fees. The property will remain on the List of Lands for 3 years before it is escheated (handed over) to the County. |
| Now the county owns the property free and clear. Typically property that made it this far in the cycle is undesirable. No one bid on it, no one wanted it. |
| If there are bids on the property in the Tax Deed Auction, the high bidder receives a Tax Deed to the property, they now own it. They are a “3rd Party Bidder”. Any amount the high bid is over the amount of the starting bid is called Excess Proceeds, Surplus or Overages. This money is due back to the property owner. |
 The website you are on (TaxAuctionSurplus.com) supplies property records that are here within the cycle. The Tax Deed Auction ended. There are successful bids with excess proceeds available to the previous property owner. Any liens that may be on the property need to be researched by you to decide if the record is worth pursuing.As a client, you can use our Liens & Owners Lookup Tool to view the research we performed. |
| Any lien holders can file a claim for that surplus within 120 days after the county mails the Surplus Notice out to the interested parties. These liens can include Mortgages, Government Fines, IRS Liens, Judgments and HOA Fees. If they do not make a timely claim, then they are barred forever from making a claim (except the IRS, they do not have a deadline) |
What if No one bids on the property?
This question does not really pertain to collecting surplus except in that if there are no bids, there is no surplus to collect. However, just to let you know what happens, first you need to understand that if a property is homestead, then the opening bid will consist of what is owed the certificate holder PLUS one-half of the assessed amount of the property.
Therefore:
If there are NO bids and the property is NOT homestead, the tax lien certificate holder gets the property for the amount they already paid when they purchased the tax lien certificate in the yearly auction.
If there are NO bids and the property IS homestead, the certificate holder has the option to pay the full opening bid (which means they have to pay one-half of the property value) OR they can decline to pay, and the property then goes to “Lands Available”… where anyone can buy the property directly from the county.
Certificate Number vs Tax Deed Number
Throughout these courses, you may see the wording “Certificate Number” and “Tax Deed Number”. They are two completely different things but each county has their choice as to what one is provided with the information about the tax deed auctions. For example, one county may give you the Cert #, Parcel #, Owners Name, Starting bid… while another county may give you the Tax Deed #, Parcel #, Owners Name and Property Address.
Each year that a Tax Lien Sale happens for a particular property, the winning bidder receives a Tax Lien Certificate Number. So if a property is late on taxes for multiple years, by the time it goes to a Tax Deed Auction, there are multiple Certificate Numbers. The county assigns a Tax Deed Number (or Case Number), to the Tax Deed Sale, but there may be multiple Tax Lien Certificates attached. If a county uses the Certificate Number in their records, that simply means the person holding THAT Certificate is the one who initiated the Tax Deed Application and forced the property to go to auction.
For the purposes of our courses, we always use the wording Tax Deed Number to correctly identify each property that is listed to go to auction.
Different Wording, Same Meaning
Here is a list of the different wording you may see among the counties, but they mean the same thing:
- The Owner of the Property going to auction: Owner, Property Owner, Deed Holder, Title Holder, Owner of Record
- The Address of the Property being auctioned: Property Address, Deed Address, Site Address, Situs
- Tax Deed Number: Deed#, Tax Deed, Case Number, File Number, Clerk Number
- The Parcel Number of the Address: Parcel, Property ID
- The money left over after the auction: Surplus, Excess, Overbid, Excess Proceeds, Overage