A tax lien certificate is the paper a county issues when it sells the right to collect somebody's unpaid property taxes plus whatever interest or penalty the statute allows. You're buying the debt and the priority position that sits behind it, not the house.
The 18% is a ceiling written into the statute. What a buyer earns is decided at the auction, and there are two main formats. In bid-down-the-rate states, bidders compete by accepting less interest, which is why you're seeing 0.25%. In premium states, the rate is fixed and bidders compete by paying cash above the lien amount. In a number of those states the premium earns nothing at all and isn't returned to you, which varies state by state, so read the county's own bid rules before assuming.
Penalty and interest genuinely behave differently. Interest accrues over time. A penalty is a flat amount added when the owner redeems, so a 5% penalty on a lien redeemed in six weeks annualizes very high, and the same 5% on a lien that sits three years annualizes low. Fast redemptions help you in penalty states and hurt you in interest states.
The yield in a scaled operation mostly comes from the liens nobody crowds into: smaller counties, ugly parcels, leftover certificates sold over the counter after the auction, and the small share that runs to foreclosure.
One practical thing that catches people: most counties require bidder registration and a cash deposit well ahead of the sale, often a percentage of what you intend to spend. Get each county's deadline and deposit terms in writing.
