What's the first number a new certificate buyer should actually be checking

Question

What I keep seeing with new tax-lien buyers is that they arrive with the statutory rate memorized and nothing else. The rate is the least useful number on the page because it's the ceiling, not what you get.

So if you're new, which single number do you look at first. I can make a case for three.

The assessed value against the certificate amount. This tells you whether the taxes owed are trivial next to the parcel or a meaningful fraction of it. A $900 certificate on a parcel assessed at $180,000 is a very different bet than $900 on a parcel assessed at $2,400, and the second one is usually something you don't want to own.

The prior year auction results for that county. Whatever rate you're dreaming about, the historical clearing rate tells you what you'll actually win at. If bid-down took last year's sale from 16 percent to under 3, your model built on 16 is fiction.

The redemption rate for that county over a few years. If 96 percent redeem, you're running a lending book and the parcel screen matters less. If it's 70 percent, you're going to own things.

All three are usually available before you register, though which records a county publishes varies by state and some publish almost nothing. Pick one to look at first and say why.

jessreyes12 · Answer

I'll ask the dumb version. Where does the assessed value come from and is it the same as what the thing is worth. Every assessor site I've looked at gives me a number that seems disconnected from what houses on that street list for, sometimes low by half. If the ratio you describe uses a number that's off by 50 percent, does the screen still work or am I just comparing two wrong things.

luis_carrera · Answer

compass, assessed value is what the county uses for taxation and the relationship to market value differs by state, sometimes by a fixed ratio, sometimes not at all. For sextant's screen I don't think the absolute accuracy matters much. You're asking whether the certificate is small relative to the parcel or comparable to it, and a value that's uniformly half of market still answers that. Where it breaks is comparing across states with different ratios.

brandonlee36 · Answer

Auction results first, for me. I have a small portfolio and the mistake I made early was building a spreadsheet on the statutory rate and then losing every parcel I wanted to somebody bidding the rate to nearly nothing. The value ratio matters for which parcels you avoid. The clearing rate tells you whether the whole exercise is worth your Tuesday, and it's the one that killed one county for me entirely.

What's the first number a new certificate buyer should actually be checking

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