Tennessee Tax Lien Certificates

Type of Tax Sales in Tennessee Counties

Tennessee holds Tax Deed Sales in each of its 95 counties. They are most commonly referred to as “Public Oral Bid Auctions,” “Trustee’s Sales,” or “Tax Sales.”

When are the auctions held?

Each county in Tennessee may hold auctions at different times throughout the year.

The Tax Lien Process in Tennessee

When property taxes are not paid, they may become delinquent. In Tennessee, if you fail to pay your property taxes for a period of 3 years the County Trustee has the right to offer the property at a Tax Sale. In some cities, such as Nashville and Knoxville, the Clerk and Master of Chancery Court will conduct the tax sales for the city and the county. In order to bid on these properties at the Tax Sale you or your representative must be present at the auction, and you must register the day of the sale. The minimum bid for each property equals the sum of property taxes owed plus administrative expenses. Administrative expenses are usually fees from the county for handling and recording the paperwork. The winning bid at the auction is the person willing to pay the most for that property.
In Tennessee, if a person comes in with a higher bid within 1 week of the auction, a “re-bid” will be issued. This just means a new auction will take place for the property at a later date. This higher bid must be 10% more than the winning bid at the auction. Another encumbrance on the sale of the property is the redemption period. The former owner has a redemption period of 1 year after the date of sale. This means that the former owner can “buy back” the property from the winning bidder. The former owner must pay the winning bidder the minimum bid amount, plus 10% per annum interest to the court. But, once the 1-year redemption period has passed, the former owner has no rights, and cannot redeem the property. If there were any expenses put into the property from the date of the sale to the date of redemption, the winning bidder may be reimbursed for those costs. A court will most likely decide reimbursements, so in this instance you would probably want to consult with an attorney. It may be wise to wait until the redemption period expires before putting any expenses toward improvement of the property. So, there are basically 2 contingencies you should wait for before improving the property in any way:

• The 10 day period of a “re-bid”
• The 1 year redemption period

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

Property Taxes owed: $4,200.00

Administrative Costs: $100.00

Minimum Bid: $2,500.00

Winning Bid: $3,500.00

So, the winning bid went for $ 3,500.00. Most counties will allow you to make a down payment of 10%, with the remaining balance due within 5-7 days. If no one makes a “re-bid” and the 1 year redemption period expires, you then get an absolute deed to the property for the amount invested. If the property is worth $ 40,000 dollars you just realized a gain of $ 36,500 dollars! Now, let’s say the former owner redeems the property 8 months after the sale date. You will get the $ 3,500.00 minimum bid back, plus interest of 6.66% (10% annual, so 6.66% for 8 months) will go to the court. This would equal $ 166.50 dollars in interest, for a total of $ 3,666.50 in redemption costs.