In some counties throughout the US there is a bidding process that allows a tax lien investor to bid a premium on tax lien certificates that are up for auction.
A premium is a dollar amount above and beyond the starting auction amount aka owed tax amount. It is one way to bid in increments to try to win the rights to the tax lien certificate. If you are the highest bidder you win in this type of bidding format.
In most every area, the premium is not reimbursed when the tax lien id redeemed. It does not earn any interest like the rest of the money paid does over the duration of the redemption period. So basically, you are paying the county extra money for the right to be the lienholder on that tax lien.
The amount that you bid as a premium should be considered, in that you could possibly bid an amount that is more than you will have paid back when the tax lien is redeemed. How does this happen, well if you buy a tax lien certificate and it is redeemed within a month or two of you having bought it, then the chances of you earning enough interest to cover your premium might be slim.
All in all, you need to make sure you know what the redemption rates are in that county and bid your premium accordingly, so you can preserve profit and not have a deficit.
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