I prefer to invest in states where the process is easy, the rate of return is between 14–18% and the county does most of the work for me.
When it comes to Maryland — well, I’ll give you the rundown and you can draw your own conclusion whether or not it’s a state you want to invest in.
Unlike most states, where the tax lien process is established by the state and standardized statewide — with perhaps a few variations at the county level on the payment method and other trivial procedures — the entire process in Maryland varies from county to county.
Can’t We All Just Get Along?
In Maryland, there are 23 counties where you can buy tax liens — as well as the city of Baltimore. At the very least, they all agree on selling tax liens as opposed to tax deeds or redeemable deeds.
But that’s the end of the line for similarities, as each tax jurisdiction is autonomous and has its own rules and regulations for the sale of tax liens — when they sell tax liens, how they sell tax liens, the rate of return, the right of redemption…
See what I mean?
Let’s break down some of the most common diversities of the various processes across Maryland.
Rate of Return: Each county and the city of Baltimore establishes its own rate of return, ranging from 6–20%. Personally, I immediately scratch the 6%-ers off my list.
Auction Dates: Each tax jurisdiction independently decides when to sell their tax liens. Many counties typically auction off their tax liens in May and June, but not all of them.
Auction Process: There are three different bidding procedures utilized during an auction:
- Oral bid or open outcry auction: Mostly used by smaller counties
- Sealed-bid auction: Usedby Montgomery County. In a sealed-bid auction, you will need to download or pick up the required form and submit your bid to the county before the day of the auction
- Online auction: The larger counties utilize online service companies, like RealAuction.com.
Registration: Each county requires you to pay a registration fee. The registration fee may or may not be applied toward winning bids and may or may not be returned at the end of the auction.
As for myself, I don’t pay to play. I expect my registration fee to be returned in the event I don’t win any bids.
Opening Bid: The opening bid customarily consists of all delinquent property taxes, penalties, fees and dues and will be sold to the highest bidder. Sounds reasonable, right? Not so fast…
There are some counties in Maryland that add 20% of the assessed value of the property to the opening bid. This is why it’s imperative that you review the bidding rules and fee requirements in the county prior to investing.
Unsold Liens: The tax liens that do not sell at the auction are “struck off” to the county and will be sold through the treasurer’s office. But not all of the counties make these tax liens available for purchase after the initial auction, so also be sure to verify this information with the county.
I prefer to purchase tax liens after the auction. That way, I won’t have to compete with other investors, where the bidding can become vigorous and expensive. In Maryland, this preference limits me to certain counties.
Redemption Period: Maryland has a two-year right-of-redemption period, although there are some counties where the foreclosure process can be initiated after only six months.
A Word to the Wise
In Maryland, should the property owner default on their payment and you do not begin the foreclosure process within two years of the date of sale of the tax certificate, your certificate will become void.
To initiate the process, I suggest hiring a real estate attorney that has experience with Maryland’s proceedings. This will save you time and money in the long run.
If the property owner — or anyone who has a legal or financial interest in the property — redeems during the foreclosure process, your expenses will be reimbursed, plus the initial investment and all accumulated interest.
It may be a moot point for me to say that Maryland is not on my list of investor-friendly states, but I do have friends that have done well investing in tax liens in Maryland.
To each their own.
Expect the best,
Mark R. Walter
P.S. I aim to come back with a full report on our delinquent landlord… so expect to hear more of this tax lien saga.
And if you want to get involved in this lucrative armchair investment — as in, you can do all your research right from your favorite spot — you can learn everything you need to know from Mark’s proprietary course. You couldn’t ask for a more patient and expert guide.