Illinois sells property tax liens at public auctions, and you can start buying Illinois Tax Liens and make big profits if you know the rules and do your homework.
Today we’ll take an in-depth look into Illinois tax liens, and the topics we’ll cover are:
- What is a Tax Lien and How Do Tax Liens Work in Illinois?
- How to Find Tax Lien Auctions
- Tax Lien Auction Rules
- Paying Illinois Back Taxes to Protect Your Investment
- Do Your Homework Before Buying Tax Lien Property
- Learn More About Tax Lien Investing
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What is a Tax Lien and How Do Tax Liens Work in Illinois?
In Illinois, a tax lien auction is your chance to invest to make big profits. You are not buying the property. You are buying the right to collect the past due property taxes plus interest. You can earn as much as 18 percent interest every six months (36% annually). The lien is sold at a tax defaulted property auction. The auction is open to the public.
If you win the auction for the tax lien properties, you get a tax lien certificate when all the paperwork is finished.
More than 95 percent of tax liens are redeemed. A property is redeemed when the owner pays you for everything you spent at the auction, plus the interest. If the owner does not pay you, then you can foreclose and own the property.
How to Find Tax Lien Auctions
Tax lien properties are auctioned off in each of Illinois’ 102 counties. Pick a county to invest in. Then find when the next tax defaulted property auction is scheduled. You can find the next auction in several places.
The local newspaper. All tax defaulted property auctions have to be advertised in the local newspaper. “[T]he advertisement shall be in a newspaper published in the township or road district in which the properties are located. If there is no newspaper published in the township or road district, then the notice shall be published in some newspaper in the same county as the township or road district, to be selected by the county collector,” states Illinois law Chapter 35, section 21-110.
Online public notice. The Illinois Press Association has Public Notice Illinois where all the tax defaulted property auction announcements are published.
The county website. Some of the county tax offices post notices of their auction on their own website. Pick a county and find that county’s website. Look for the tax collector or county treasurer for more information on tax lien properties.
Some counties, like DeKalb County sell the list of properties scheduled for auction. The website says, “Lists are available for a $75.00 prepaid fee. You may send your payment at any time. We will then send you a list when they become available.”
If you pick a county and no auction is scheduled, go to another county. Each county decides when to hold its auction.
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Tax Lien Auction Rules
Every county has different auction rules. You have to know the rules in the county where you want to invest. Most counties require registration be turned in at least 10 days before the auction if you’re buying Illinois tax liens. Here are examples of some county-specific rules:
Adams County requires a refundable $300 deposit. If you do not win anything in the auction, you get this money back. You also have to fill out an IRS form W-9. Adams County holds in-person auctions so you or your representative has to attend the auction. You can read all the rules for the Adams County tax defaulted property auction here.
Knox County requires a $50 deposit, refunded if you don’t win anything at the auction. But you have to be at the auction to get your money back.
Sangamon County has a $200 registration fee. The fee will be refunded if you attend the auction but don’t buy anything. If you don’t go to the auction, you forfeit the deposit.
Each county sets the date for its tax defaulted property auction. Tax defaulted property auctions can happen at any time during the year in Illinois.
Each county treasurer website will also tell you how to pay for any winning bids.
A Bid Down Auction
When you’re buying Illinois tax liens, note that Illinois has a “bid down” auction. The price for the property is set and does not change. The interest rate starts at 18 percent per six month period. Bidders drive down the interest rate until no one else is willing to bid a lower return.
Here’s an example to help you understand this.
A state tax lien on a house in Chicago goes on the auction block. The past due taxes plus the premiums added by the county come to $2,500. You know if you win the auction, you must pay the county treasurer $2,500.
Bidding starts at 18 percent. Someone bids 17 percent. Someone else bids 16 percent. The interest rate continues to drop until no one else bids.
The DuPage County Treasurer explains it this way, “The bid represents the rate of interest that would be earned by the tax buyer on the purchase amount during each six months of the redemption period, if the owner redeems the sale. By law, the maximum interest rate bid is 18%. The sale is to the tax buyer who bids the lowest percentage of interest. In the last several years, the average successful bids ranged from 0% to 4%.”
Paying Illinois Back Taxes to Protect Your Investment
When buying Illinois tax liens, you must protect your investment. That means you have to pay other past due property taxes. The good news is you can add these taxes to what the homeowner has to pay you. The highly respected legal information website Nolo says a homeowner has to pay “the total of all subsequent taxes, special assessments, accrued interest on those taxes and special assessments, and costs that the purchaser paid, plus a penalty.”
Illinois gives homeowners a “2½ year redemption period” to redeem their home, according to the Adams County treasurer’s website. Property taxes will come due during this time. DuPage County says the homeowner “has a 2 to 2½ year redemption period, depending on property classification.” In certain cases, the redemption period can go up to three years. You have to pay those taxes to protect your investment, if the homeowner has not redeemed the property.
This is why it is important to know the rules for buying Illinois tax liens. The county treasurer can tell you how long the redemption period for a piece or property is.
Do Your Homework Before Buying Tax Lien Property
You must do your homework and find out if the property is worth your investment. Some properties are abandoned or are too small to be useful for anything, except selling to the adjacent property owner. This is why you need to learn as much as you can about the property. Know as much as you can before you invest.
The real estate information website Zillow is packed with details about individual properties, including those being sold at tax defaulted property auctions. I have two videos on my website, Members.TedThomas.com, that teach you everything you need to know about using Zillow. I also have many more videos that teach you everything you need to know about investing in tax defaulted real estate to make big profits.
Here are just a few of the things you will learn from Zillow:
- A realistic estimate of the property’s value.
- The size of the home, including bedroom and bathrooms.
- What the house will generate in monthly rent.
If at all possible, look at the house in person. Illinois holds in-person auctions, so you or someone representing you must attend the auction. If you hire someone to represent you at the auction, they can look at the house, take pictures for you and give you information about the house’s current condition.
Learn More About Tax Lien Investing
You can make big profits at tax defaulted property auctions when you’re buying Illinois tax liens, if you know the rules and do your homework. Let me help.
If you’d like to know more about profiting from Illinois tax liens and tax delinquent property investing, Ted Thomas provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops, web classes, and personal coaching with certified coaches.
Learn how to reap huge rewards from tax lien and tax deed investing! Get started today by taking advantage of Ted’s Free Master Class! Act now, it costs you nothing and will give you a big head start!
Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.