This type of bidding method is used when buying tax lien certificates. In this auction you are bidding down the interest rate or rate of return you will be receiving on the tax lien certificate. Bidders will decide how low of an interest rate they are willing to accept before buying the tax lien certificate.
Since profit margins are based on the amount of interest which may be collected if a property owner buys back the tax lien certificate during the grace period, investors must take care not to bid "too low," thus eliminating any real profit. Some states, however, require a minimum interest rate, regardless of the actual bid. In some areas, the minimum interest rate that can be collected is 5%, so even if an investor bids 1% to buy the tax lien certificate, they are still guaranteed 5% by state law.
If you would like the chance to work with me or one of my fellow real estate investor coaches and our advanced training programs, give us a call anytime to see if Dean's Real Estate Success Academy and our customized curriculum is a fit for you. Call us at 1-877-219-1474 ext. 125