What Are Over-the-Counter Tax Lien Sales?
Written By Tony Martinez
Main Points
Most investors think tax lien investing means high-pressure auctions and brutal bidding wars. But there’s a smarter, quieter path with far less competition: over-the-counter (OTC) tax lien sales.
These quiet opportunities arise after initial auction periods, when counties still hold unsold liens that didn't attract buyers. For savvy, patient investors, OTC tax liens can be a gateway to strong returns, often without upfront pressure.
In this article, we'll explore what OTC tax lien investing is, how it works, and what you need to know to capitalize on this overlooked niche.
The OTC Process And How It Works
In tax lien investing, over-the-counter (OTC) sales refer to the opportunity to purchase unsold tax liens directly from the county after a tax lien auction has ended.
Here's how it works:
1. Tax lien auctions are held. Counties auction off tax liens to investors when property owners fail to pay property taxes. These are the typical tax lien certificate auctions, open to the public. The public auction awards the certificate to the highest bidder. Typically, they are offered at the price of back taxes only; however, auctions vary by county and state, which determines whether you are accepting an interest rate below the state's standard.
2. Not all liens sell. For various reasons (e.g., low property value, undesirable location, insufficient auction attendance /interest), some tax liens are not purchased at auction. These get placed on a different list held by the county.
3. These become OTC liens. After the auction, the county may list these unsold liens for sale over the counter, meaning they can be purchased directly, without bidding. They can be bought at face value, usually for the amount of unpaid taxes and fees. There's no competition, no bidding, and often no need to attend an auction at all. Investors can browse the county’s OTC list, conduct their research on the properties, and choose which liens to buy. This makes OTC investing an accessible and low-pressure option, especially for beginners or those looking to ease into tax lien investing.
How to Buy OTC Tax Liens
While the process is more straightforward than attending a live auction, it still requires careful attention to detail and thorough research. Unlike competitive bidding environments, OTC purchases are typically done directly through the county, often on a first-come, first-served basis.
Take these steps when looking to buy OTCs:
1. Find the list: Visit the county tax collector or treasurer’s website and look for an "OTC" or "unsold liens" section.
If an OTC list isn’t available on the website, contact the county and inquire about their procedures regarding unsold lien inventory after the sale. Ask what the list is called, how to acquire the list, how to purchase liens from the list, etc.
2. Do your due diligence: Research the property's location, condition, zoning, and other relevant details.
3. Contact the county: Follow their process for purchasing (may require forms, ID, payment, etc.).
4. Keep records: You’ll receive a lien certificate. Often, a digital PDF is sent by email or is viewable on a designated online portal. Monitor redemption status and deadlines.
Buying OTC tax liens is a practical and accessible way to get started in tax lien investing, without the stress of auctions or the risk of overbidding or compromising the interest rate you are willing to accept.
Just remember: while the process may sound simple, success relies on careful due diligence and organized follow-through.
OTC Investing: Pros and Cons
Before diving into OTC tax lien investing, it's essential to understand both the advantages and potential pitfalls. While these liens can offer accessible entry points and appealing returns, they also come with the same risks that prospective lien investors should always consider. Below is a breakdown of the key pros and cons to help you decide if OTC investing aligns with your strategy.
Pros:
Easier access (no auction) and lower upfront competition.
Potential for full interest rates set at the state level (not compromised by auction).
No bidding. You pay the lien amount without competition, which will typically be much less than that if you were to go to the original auction
Can be researched more thoroughly ahead of time.
Great for beginners to get started without auction pressure.
Cons:
"Leftover" or limited inventory.
Lists may be infrequently updated as OTC liens are issued.
Over-the-counter tax lien sales can be an innovative and strategic way to enter the world of tax lien investing, especially for beginners or those looking to avoid the intensity of competitive auctions.
However, the ease of access shouldn't overshadow the importance of due diligence. Because these liens often involve less desirable or overlooked properties, careful research is essential. When approached thoughtfully, OTC liens can provide steady returns and a manageable entry point into this rewarding investment niche.
Variations by State (and County)
When it comes to Over-the-Counter (OTC) tax lien investing, there’s no one-size-fits-all approach. Each lien represents a specific property, and with it come unique factors such as:
Assessed value
Amount of delinquent taxes owed
Redemption period
Property condition and associated risks
In addition, every state, and often each county within a state, has its own rules and procedures governing OTC tax lien sales, including:
Redemption timelines
Interest rates and how interest accrues
Foreclosure rights and timelines
Purchase requirements (such as forms, fees, or background checks)
This wide variation means investors must go beyond simply finding a list of unsold liens. Understanding local laws is essential, and the OTC process often lacks the convenience of a "Buy Now" button. To succeed, you'll need to take the time to learn the specific regulations and procedures for each jurisdiction where you plan to invest.
Value Your Time And Your Money
When it comes to investing in over-the-counter tax liens, it's essential to understand precisely where your money is going and what you're getting in return. While the potential for strong returns exists, success depends on thorough research, patience, and a clear understanding of the associated risks. Treat each investment as a business decision. Your time and capital are valuable, so ensure you're using both wisely.
At USTLA, your success is our mission. That’s why we offer a comprehensive Free Online 3-Module Crash Course designed to walk you step-by-step through the essentials of tax lien and tax deed investing.
Whether you're new to the field or looking to refine your strategy, this free training is the perfect place to start your journey with clarity and confidence.
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Vital Information Beginner’s MUST KNOW FIRST so you can Get Started Right
Lesson #1
What is Tax Lien Investing & How Can it Help You Achieve Financial Freedom
Lesson #2
How to Acquire Properties for the Back Taxes & Penalties Only
Lesson #3
How Much Investment Capital is Needed to Get Started?
As with all investments, there is always an element of risk. Even if the interest rates are written into state government law, mandated by state government law, and are regulated by state government law, there is a chance of you losing part or all of your investment. You must always try to get the best education and practice safe investing, no matter which investment vehicle you choose.