Attorney Charles Gormly is licensed in both Maryland and Washington, D.C., and he has been a tax sale investor and servicer (someone investing on behalf of third parties) in both of those jurisdictions since 2004. He joined Brian Seidensticker, CEO of Tax Sale Resources, for an informative podcast interview about how tax sales in D.C. and Maryland work.
While the nation’s capital doesn’t have statehood status, and its population is less than a million, investors think of it as a state. Both are tax lien states and have redemption periods of only six months.
Tax Lien Sales in Maryland
Maryland offers three different categories of tax sales – those in smaller eastern counties, those in larger suburban counties, and those in the city of Baltimore. Maryland has 23 counties, plus the city of Baltimore which, although it’s not a county per se, operates like one when it comes to tax sales. All sales are held in May or June, with the exception of St. Mary’s County – which holds its sales during the first week of March. About half of Maryland’s sales are conducted in person and half online – and online sales are typically single bid sales where you submit a spreadsheet as your bid.
Each Maryland County Has Its Own Rules
Every jurisdiction has its own process, and sets its own interest rates, so be sure to understand those before bidding. Most counties practice a combination of the bid down interest rate with a highest premium bid who actually wins. The high bid premium is non-interest bearing, with 20% of anything over 40% of the assessed value paid to the county but reimbursed to the bidder upon redemption. Not all counties require that the entire premium bid is due for payment at the time of sale. In that case it’s only due upon foreclosure. The foreclosure process must begin within two years after the completion of the sale, and noticing must commence after four months from the sale.
Tax Lien Sales in Washington D.C.
Interest paid is a healthy 18%, and is due within a week of the sale. Real estate values in D.C. are generally quite high, and most properties end up being redeemed, so most investors focus on liens, not deeds. Interest is also only earned on the based delinquent amount, not the surplus, although if the property does redeem the surplus will be returned. You can buy subsequent taxes and earn interest on those, but it can take a very long time for D.C. to process your payments. Investors can find the D.C. government difficult and complicated to deal with, so be prepared to exercise patience and flexibility.
Washington D.C. Foreclosure Timeline
After four months have passed from the date of the sale, if the certificate purchaser wants to foreclose they must do the posting process themselves, and comply with all foreclosure noticing requirements including posting on the property. Noticing must commence within one year of the date the certificate is issued (not from the date of the sale) and must begin a minimum of 45 days before filing a lawsuit to foreclose.
Learn More about Tax Lien Sales
Both of these states offer great opportunities for investors, even if D.C. does have some barriers to entry and both states have unique ways of conducting sales. To take a much deeper dive into how the tax sales process works in Maryland and Washington, D.C., listen to the entire insightful podcast interview that Charles Gormly did with Brian Seidensticker, CEO of Tax Sale Resources. Again, check out the video above or you can also learn more by reading a white paper by Donald Dinan of Goetzfitzpatrick concerning Washington D.C or from James Truitt about Maryland.
