Posted by Courtney Lane on Sun, Oct 25, 2009 @ 09:38 PM
Bidding Strategies
Periodically I read comments on forums by people show say they have the best bidding strategy and that 20 minutes into the auction they know who their competition is and that they then are in control. Darn, I sure wish those folks had worked for me over the seven or eight years when we bought over $100 million dollars of tax liens. In my experience, those who have magical systems are few and far between.
People will play all kinds of games in auctions:
Disconnect your emotions and ignore the other bidders. You have determined, or should have, what you are willing to pay for a property. Enter the bidding fairly early on and quietly continue in the bidding until you either buy the lien and/or property or your level is passed.
Do not violate your own guidelines and do not chase the property. If, after some period of time, you find you are not buying anything and that everything is going far beyond your level, you have learned something. What you have learned is that there are other people who feel your levels are wrong! They may be right, but they also may be wrong.
Four years ago we were selling due diligence to 22 institutional buyers – today four of those firms are still in business. Why? Well it isn’t because they made enough money and they decided to retire. They paid too much for too many properties.
The one tip I can give the individual investor: Look at the smaller liens. In a number of jurisdictions the taxing authority will accept partial payments on taxes. This means that there can be $200,000 houses in the auction that only owes $136,000 in delinquent taxes, because they have already paid $800.00 of the tax bill. If you, during your due diligence, can determine which properties fit this bill, you will find that the institutional buyers will not be bidding on them.
The institutional buyer will seldom buy a lien below $400,000 because they have a “servicing cost” for each piece of paper they handle and a lien below $400,000 is not worth it to them. So these are the ones you should find and go after.
What bidding system makes the most sense to you?