Iowa Tax Lien Certificates

Type of Tax Sales in Iowa Counties

Iowa holds “Public Oral Auctions” for the right to pay off delinquent property taxes and collect interest on the amount paid. These are known as Tax Lien Certificates.

When are the auctions held?

Auctions in Iowa are usually held in June of each year.

The Tax Lien Process in Iowa

Iowa has one of the highest Interest Rates on their Tax Lien Certificates. The Interest Rate is 24%. In Iowa, you are not bidding on the property itself, but on the right to collect interest from the property owner who has failed to pay the taxes themselves. The minimum bid at the auction will be the total of taxes owed, interest, and other administrative charges. The winning bid will be the person willing to pay the total money due and take the least percentage of the property being sold. This will be a factor if the property owner fails to redeem the property within the time allowed. This is known as the “Redemption Period.” In Iowa the owner has 1 year and 9 months to redeem the property, by paying all monies owed (including the interest owed to the purchaser of the certificate).
If the owner fails to pay within this period, the purchaser of the certificate may serve a notice to the owner and anyone occupying the property letting them know the redemption period has ended and a deed will be given to the purchaser if not redeemed. This is the last chance for the owner to redeem the property, and must do so within 90 days of being served notice by the purchaser. If not, the purchaser of the certificate is issued a deed by the county treasurer. But, if at auction you bided on only a percentage of the property, you become a co-owner of the property with the existing owner. This is an important point that you must take into consideration when bidding. Also, if the purchaser of the certificate must serve a notice to the owner closing the redemption period within 3 years, if not the right of the purchaser to be issued a deed expires.

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

Minimum Bid: $5,000.00

% of Property Bided on: 100.0%

Recording Fee's: $25.00

Let’s say the owner of the property redeems after 11 months, 2 days (each fraction of a month counts as an entire month). They must pay back $6,200.00 (5,000 @ 24% interest or 2% each month). Now, if the former owner doesn’t redeem, and the holder of the certificate is issued a deed, then the property is theirs alone, since the % bided at auction was at 100%.