No. of Recommendations: 1
I attended my first tax deed auction yesterday at the local courthouse. There were about 25 people in the room and 3 properties out of the initial 10 had made it to the auction without being redeemed beforehand. When the clerk read out the names of the tax deed applicants, I became curious about the tax certificate holders themselves.

This morning, I've looked at the results for my Florida county from last year's tax certificate auction. The summary has raised some questions:

Cert Bid % Total Value of all Certs sold at Given %
18.00% $11,281.67
17.75% $177.96
16.75% $908.06
15.75% $360.16
14.75% $455.51
14.00% $11,420.53
13.75% $2,172.86
12.75% $1,328.44
12.00% $23.96
11.75% $1,716.43
11.50% $23,985.52
11.25% $2,165.20
10.75% $1,327.78
9.75% $623.11
9.50% $868.10
9.00% $2,054.42
8.75% $5,293.09
8.50% $37,204.38
8.00% $18,783.72
7.75% $4,310.05
7.50% $3,111.72
7.25% $1,857.20
7.00% $2,611.25
6.75% $202.23
6.50% $89.26
5.75% $1,893.97
4.75% $4,962.48
4.50% $19,325.74
0.25% $5,683,848.79
0.00% $8,455.60
Grand Total $5,852,819.19

That's the total of current certificates that have not been removed but includes ones already redeemed (subtract $500k from that total to account for redemptions to date). This represents just over 5,000 properties. The median value of the certificate is $574 and the average value is $1,064. There are 928 unique bid winners represented in the above totals.

I have a number of questions.

1 - Why on earth is there so much interest in bidding 0.25% on the vast majority of tax certificates? What is the attraction of investing $5.6M at 0.25% per annum on securities with first lien on real estate? There must be some hidden benefit to being a tax certificate holder other than the interest earned on your investment -- what is it?

2 - Looking at the names of the winning bidders in the 0.25% category, I see some related companies: "Gamma Tax 1, LLC," ..., "Gamma Tax 10, LLC," Gamma Tax 47, LLC," ... "Kappa Tax X, LLC,", "Sigma Tax X, LLC." Someone has incorporated X number of LLC entities to increase their chances of winning the lottery process when there are 2+ winning bidders at the same interest rate. Holy smokes, batman, someone wants these things so badly that they are willing to handle the overhead of forming 100+ LLC entities to increase the odds. Why?

3 - Other winning bidder names are of the form "XXX as agent for Equifunding Inc." Equifunding Inc had 37 agents in this particular sale, with names like "Van Buren Fin Corp" and "National Realty Acceptance Company, LC". What is this about? Is Equifunding employing these other investment companies to buy tax deeds around the state or country for them? Possibly related were the "Wachovia as TTEE for XXX" -- there were a lot of unique entities for which Wachovia was the trustee. What is that about?

4 - With so much interest at the 0.25% rate, why on earth would there be any tax deeds left at the rates above that? I don't see any real correlation between the interest rate and assessed value of the underlying real estate or number of prior certificates (many of the 0.25% properties had a high number of prior certificates issued). To win so many certificates, I presume a representative from these entities are issuing blanket bids on everything, so why would these few properties be left at higher rates?

Finally, there are two reasons listed that tax certificates could be "removed" from auction: "Paid" and "Struck to County." Under what circumstances would the county choose the latter and why? What benefit does the county have for owning tax certificates?

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