California Tax Lien Certificates

Type of Tax Sales in California Counties

California holds Tax Deed Sales in each of its 58 counties. They are most commonly referred to as “Public Oral Bid Auctions” or “Tax Sales.” California Law allows for the sale of Tax Lien Certificates, but as of yet no county has sold them.

The Tax Lien Process in California

When property taxes are not paid, they may become delinquent. In California, if you fail to pay your property taxes for a period of 5 years the County Treasurer or Tax Collector has the right to offer the property at a Tax Sale. In order to bid on these properties at the Tax Sale you or your representative must be present at the auction. The minimum bids for each property equal the sum of property taxes owed plus administrative expenses. Administrative expenses are usually fees from the county for handling and recording the paperwork. If the minimum bid is not met at the Auction the Treasurer or Tax Collector may offer the property for a bid they deem reasonable. The bids start out at the minimum and go up, with the winning bidder being the person willing to pay the most above the minimum bid amount. In most cases you must register before the auction to obtain a bid number, and payment must be made by a cashier’s check or in cash. Most counties in California require you to pay the full amount of the bid immediately following the auction of that property. The full amount will be the winning bid amount, plus a transfer tax of 55 cents for every $500.00. In some counties, as with other states, you are only required to make a percentage of the payment immediately following the auction. You will want to find out the payment process used in the county you are bidding. If you are only required to put down a percentage of the bid after the auction, you may be able to acquire financing for the additional amount. This of course will have to be worked out with your financial institution.

All sales at California Tax Sales are final, and the previous owner of the property does not have the “Right of Redemption” after the sale is made. Right of Redemption refers to the owner of the property paying all expenses owed, and thus removing the property from the Tax Sale list. The previous owner can only redeem the property prior to the auction date. There is a 1-year stature of Limitations to bring action against the sale of the property, and you will probably have to wait for this period to expire to acquire title insurance.

All Liens and Encumbrances will be extinguished with the sale of the property at the auction, with a few exceptions:

• Easements attached to the property, water rights, and title held separately from the title of the property
• Any offers involving use of the property to a public entity or for public use
• IRS liens are always the first lien on property and are never extinguished

Here's an example of how a TLC purchase could work in California:

Tax Lien Certificate Face Value: $32,000.00

Winning Bid Amount: $45,000.00

Recording Fee's: $100.00

Transfer Tax: $49.50

So, the Investor is willing to pay $ 45,000.00 for the property, and must pay a total of $45,149.50 (winning bid plus recording fees and transfer tax).