Austin Barnes, an attorney with the Sandhu Law Group in Ohio, has specialized in real estate tax foreclosures, tax lien due diligence, and tax lien investment law – on both the government side as well as the tax sale investor side – for more than 30 years. He was interviewed for a Tax Sale Insiders podcast about how the tax sale process works in Ohio, by Tax Sales Resources' CEO, Brian Seidensticker. As Barnes explained, property taxes are collected by the counties in Ohio, and the County Treasurer conducts the tax lien sales − which Ohio refers to as tax certificate sales. All 88 counties in Ohio have the option to conduct tax certificate sales and about half of them do, and tax certificates are transferable.
The Ohio Tax Sale General Process
You typically need to register and pay a $500 registration fee which is applied to your purchase if you win and refunded if you don’t. If the certificate isn’t redeemed during the one-year redemption period, the lien certificate holder can request a foreclosure by using a Notice of Intent, which can be requested only after the redemption period. But one thing that’s rather unique in Ohio is that you are not required to bring an additional quiet title action to take possession with an insurable title. Perhaps the most unique characteristic of tax sales in Ohio is that there are two categories of tax sales, the Negotiated Sale and the Bulk Sale. Almost all Ohio counties that do tax sales offer Negotiated Sales, whereas fewer of them offer Bulk Sales.
Ohio Negotiated Sales
In a Negotiated Sale, the Treasurer has sole discretion to award the purchase – based on criteria such as the purchaser’s track record of investment and financial stability. So you may submit the highest bid but that doesn’t necessarily mean that you win. One way to think of this system is that it’s similar to a Request for Proposal (RFP) process. In these sales you can submit a premium or a discounted bid, and you can negotiate the attorney’s fees and other miscellaneous terms of the sale. For example, you could negotiate to extend the timeframe for proceeding to foreclosure from the usual 120 days to 180 days or so. You may also ask that some properties in the sale be excluded if you don’t want to own them. The Treasurer will decide whether or not to allow those exclusions – and you’ll subsequently adjust your bidding accordingly. Another thing specific to Negotiated Sales is that the purchaser must submit an affidavit to the Treasurer, and if you don’t your purchase can be deemed ineligible. The information on that affidavit needs to be accurate and honest – and if it is not, you could be banned from participating in tax sales in that county for up to five years.
Ohio Bulk Sales
With Bulk Sales, the bidding starts at 18 percent interest and you can bid that rate down in increments of a quarter of a percent at a time. You can bid all the way down to zero, and the lowest bid wins. In these sales, versus Negotiated Sales, the Treasurer must, by law, reward the purchase to the lowest bidder. The purchaser of the certificate earns either 1) simple interest at the winning rate, or 2) six percent of the certificate purchase price. That’s why many bidders don’t go lower than a ¼ percent bid. Otherwise if they go to zero, their potential interest rate is locked at zero. But if they don’t go that low they can gain the more attractive six percent rate.
Not Your Typical Mom and Pop Sale
Sales in Ohio can be for one property or multiple properties. But both Bulk and Negotiated sales most often involve multiple property listings sold in bundles. In a small rural county, for example, the dollar amount of these sales may be lower, but in larger counties or places with higher-value properties bundled together, the sales price may be in the tens of millions of dollars. For that reason, not everyone will be able to participate the way they do in other states and jurisdictions that are more accessible to investors with only very small amounts of capital.
The Bottom Line on Ohio Tax Lien Sales
Since Ohio’s process is a bit different, it underscores the importance of doing your homework ahead of time. Each county sets their own rules, so be sure to check with them to understand the nuances of that particular county’s tax sale procedures and requirements. As always, performing due diligence to understand as much as you can about what you are bidding to purchase is vital to your investment success. To learn more about Ohio tax certificate investing, read Austin Barnes’ white paper and check out details regarding the tax foreclosure process in Ohio. You can also watch Brian Seidensticker’s full podcast interview with Barnes on Tax Sale Insiders. Tax Sale Resources also has more information on the tax foreclosure process in Ohio in an interview with Maureen Zink of Carlisle Law.