Computerized Tax Auction Brings In Lower Bids, Fairer Process
While it might not have been quite as exciting as tax auctions used to be, owners of properties with delinquent property taxes are probably loving the newer, quieter, computerized bidding system that enabled tax lien buyers to quietly punch in bids on their personal keyboards rather than shouting them out and struggling to be heard[1]. The average bid at the Madison County (IL) tax auction was “just under four percent,” reported treasurer Kurt Prenzler, who ran on the promise to use this computerized system in his tax sales moving forward in order to “provide better accuracy and less chance for collusion or fraud.”
With less excitement and confusion came lower bids – including a number for zero-interest in hopes of collecting 12 percent in the second year of delinquency – and a chance for a nap on the part of at least one observer. Prenzler considered the auction to be a success, however, particularly in light of his predecessor’s controversial approach to tax auctions which, according to many observers, including picking winning bidders “more or less at random.” Using the new computerized system, results of bidding were displayed on a screen in the front of the room while tax buyers each sat quietly with their own laptop and entered their bids on their personal computers.
Do you think that computerized auctions will improve the way that tax liens are sold?
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[1] http://www.thetelegraph.com/news/tax-50927-bids-brings.html
I think Online real estate tax lien sale auctions are the future for all counties and states that issue tax lien certificates. I’m glad to see Illinois counties are moving toward using online auctions. Five years ago there were almost no counties in Illinois using online auctions.
The one aspect of the Illinois online auctions that concerns me is that you still have to be at the county building to place the bid - even though it’s an online auction.
The goal of the county tax lien auction is to get as many tax lien certificates sold as possible. In the past, if a county had several thousand certificates, there just wasn’t enough time to sell every certificate in an open outcry auction.
The system Madison county is using still requires each bidder be in the county building, and the auction is done one parcel at a time. The only difference from the old open outcry is that instead of waving a bid card and making a noise to be heard, you are punching the computer.
There are a couple of other online auction systems being used by other states that allow the bidders to place their bids from home. The bids can be placed and changed several weeks in advance and up until the auction is closed. The total number of certificates are grouped in a “batch”. Each batch closes at a predetermined time.
The batch concept allows for tens of thousands of certificates to be sold by a county in a matter of a day or two. By allowing the bidders to be at home and not on-site, you attract many more bidders from across the country (and even internationally) to the auction. This again helps meet the county goal of selling the maximum number of certificates. With more bidders, the rates go lower, so the burden on the homeowner is lessened because they will have a lower interest rate to pay.
Illinois has some of the highest rates for tax lien certificates out of all the states. If the counties adopted the online auctions that allowed anyone to bid from anywhere, all the Illinois counties would see a huge increase in number of bidders and certificates sold. The rates would be lower for the property owners and the counties would be able to meet their budgets easier.
Even though I live in Illinois, I invest more money in other state tax lien certificates because I can do all my research from home, bid from home, and get very good rates of return from my investments. I don’t have to take a day off from work and be physically present in an Illinois county room to place my bid one certificate at a time.
I’d like to see Illinois counties move toward the online auctions that do not force the bidder to be physically present to bid online.
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