How to Buy Investment Tax Liens in Ohio

Tax liens represent a mechanism for local governments to recover unpaid property taxes. When property owners fail to meet their tax obligations, the overdue amount becomes a lien against the property. To address these delinquencies, county treasurers in Ohio have the authority to sell these tax liens to private investors. This process allows counties to collect immediate revenue while offering investors an opportunity to earn a return on their investment.

Understanding Ohio Tax Liens

A tax lien in Ohio is a legal claim placed on a property due to unpaid real estate taxes, assessments, and charges. This lien secures the delinquent amount, which includes accumulated penalties and interest. Under Ohio Revised Code Section 5721, county treasurers are authorized to sell these liens to third parties. The sale transfers the county’s right to collect the delinquent taxes to the investor, who then holds a tax lien certificate.

The tax lien certificate transfers the state’s first lien on the property to the investor, providing a superior claim over most other liens, including mortgages. Ohio law permits county treasurers to sell these certificates through public auctions or negotiated sales.

Properties become eligible for a tax lien sale after taxes remain unpaid for a specified period and are certified as delinquent. The county auditor places these properties on a public delinquent land list. While some counties may offer individual tax liens, many sell tax lien certificates in large portfolios or “bundles.”

Preparing for Participation

Before engaging in an Ohio tax lien auction, prospective investors must conduct thorough research and fulfill specific registration requirements. Identifying available tax liens involves checking the websites of individual county auditors and treasurers. These online resources often provide property search tools where details about delinquent properties and associated tax liens can be found using addresses, owner names, or parcel numbers.

Investors should examine property details, including condition, market value, and any other existing encumbrances. While the county treasurer’s office sells only the right to collect delinquent taxes, not the property itself, this due diligence is the purchaser’s responsibility. Some counties may also offer updated lists of properties as the auction date approaches, reflecting recent payments or removals.

Registration for Ohio tax lien sales is mandatory, with specific requirements and deadlines varying by county. Bidders must generally complete an IRS Form W-9, Request for Taxpayer Identification Number and Certification. A refundable registration deposit, often around $500, is typically required, payable by cashier’s check, money order, or certified check.

Beyond the initial registration, an additional deposit, such as 10% of the total purchase price, may be due before the sale commences. Many counties also require a letter from a financial institution affirming the bidder’s sufficient funds to cover potential purchases, along with authorization for the treasurer to verify this information.

Participating in the Auction

Once preparatory steps are complete, investors can participate in the tax lien auction. Auction mechanics vary, with some conducted online and others in person, depending on county procedures. During the auction, bidding typically begins at a specific interest rate, such as 18% simple interest per year, with investors bidding down the interest rate in increments, often 0.25%.

The tax certificate is awarded to the bidder who accepts the lowest interest rate. For counties that sell liens in bulk, the entire portfolio of delinquent tax liens is offered as a single lot, rather than individual parcels. This approach usually targets institutional investors or large investment firms, as the purchase price for a portfolio can be several million dollars.

Following a successful bid, the winning investor is typically required to complete the payment process. The initial deposit made during registration may be applied to the purchase price. The remaining balance, along with any applicable fees, must be paid within a short timeframe, often within a few business days, via methods such as wire transfer or certified funds.

Upon full payment, the county treasurer issues the tax certificate. This certificate officially records the purchase price, the agreed-upon interest rate, the sale date, and the certificate holder’s information. The treasurer’s office often handles the recording of the tax certificate with the county recorder’s office, formalizing the lien holder’s claim.

Managing Your Tax Lien Certificate

After acquiring a tax lien certificate in Ohio, the investor holds the right to collect delinquent taxes, plus interest, from the property owner. The initial period following the sale is the redemption period, during which the property owner or another interested party can pay off the outstanding lien. This period typically lasts one year from the date of the tax lien sale.

During the redemption period, interest accrues on the certificate purchase price at the rate established at the auction, up to 18% simple interest per year. The property owner redeems the lien by paying the full amount of delinquent taxes, interest, and any associated fees to the county treasurer. The county treasurer then disburses these funds to the tax lien certificate holder.

If the property owner fails to redeem the tax lien within the statutory redemption period, the certificate holder can initiate foreclosure proceedings to recover their investment. While foreclosure cannot typically begin until one year after the tax lien certificate sale, this timeframe can be shortened if the property is deemed vacant and abandoned. The lien holder must then prepare a Notice of Intent to Foreclose and file a complaint for foreclosure.

The foreclosure process proceeds under Ohio Revised Code Section 5721, culminating in a judicial sale of the property. The property owner retains the right to redeem the property even after foreclosure proceedings begin, up until the court confirms the judicial sale. If the property is sold at a judicial auction, the proceeds satisfy the delinquent taxes, interest, and foreclosure costs, with the tax lien holder receiving payment from these funds.