Auction Bidding Strategies: How to Win Liens Without Overpaying
Updated Oct 8, 2026
After a few over-the-counter purchases, many investors move on to the county tax sales. Auctions offer more choice, but also competition. To do well you need to understand the bidding format and decide your limits before the sale starts.
The two most common formats are bidding down the interest rate and bidding up a premium. (A few states use other methods, such as Illinois's penalty-rate bidding or Iowa's tie-breakers; see the state guides.)
Format 1: Bidding down the interest rate
Used in states such as Florida and Arizona.
- How it works: bidding opens at the state's maximum rate (18% in Florida, 16% in Arizona). Bidders offer lower rates in set increments. The bidder who accepts the lowest rate wins.
- Example: a Florida certificate opens at 18%. You bid 17.75%, someone bids 17.5%, and so on. The final rate is what you earn if the certificate is redeemed (subject to Florida's minimum charge rules).
- Pros:
- Your cost is the lien amount; you never pay above face value.
- You know your rate the moment you win.
- Cons:
- Competition can drive rates very low; on popular parcels in some counties, close to zero.
- Strategy: set a walk-away rate before the sale (for example, "nothing under 8%") and stick to it. There are always more liens.
Format 2: Bidding up a premium
Used in many Maryland counties and in some other states.
- How it works: the rate is fixed (by state or county law). Bidders compete by offering a premium above the lien amount. The highest bidder wins.
- Example: a $1,000 lien at a 12% fixed rate. You bid a $100 premium, someone bids $200, and so on.
- The crucial detail: in many premium states the interest is paid only on the lien amount, not the premium. The premium may be refunded without interest when the lien is redeemed, and in some states or situations part or all of it can be lost. Read the county's rules before bidding.
- Pros:
- A known rate on the lien amount.
- Cons:
- The premium is capital that earns little or nothing, lowering your effective return.
- Bidding wars make it easy to overpay.
- Strategy: compute your real return before you bid. Paying a $100 premium on a $1,000 lien at 12% means $120 of interest on $1,100 invested, roughly 10.9% for a full year, and less if the premium is lost or the lien redeems quickly.
Comparison
| Feature | Bid down the rate | Bid up a premium |
|---|---|---|
| What you bid on | The interest rate (%) | An amount above the lien ($) |
| Your cost | The lien amount | Lien amount plus premium |
| Interest earned | On the lien, at your winning rate | Usually on the lien only, at the fixed rate |
| Premium risk | None | Capital tied up; may be refunded without interest or lost |
| Main advantage | Never pay above face | Known, fixed rate |
| Main drawback | Rate can fall very low | Premium erodes return |
Before any auction
- Read the county's bidder rules: registration, deposits, bid increments, payment deadlines.
- Do your research on the full list in advance, and build a bid list with a maximum for each parcel.
- Decide your total budget, and leave room for subsequent-year taxes you may want to pay.
Upcoming sales and each county's bidding format are listed on LienDeed county pages; active bidders can manage bid lists in LienDeed Pro.
This article is general information, not financial or legal advice. Tax-sale rules change; always confirm with the county.