Click to download complete white paper from Jim Truitt on the Maryland Tax Sale Process.
Former Maryland Assistant Attorney General James Truitt, Jr. has practiced law in Maryland for more than 20 years, and is a Certified Tax Lien Professional and Board Member of the National Tax Lien Association. He shared his expertise to help break down the key ways that tax sales are conducted in the Old Line State, and how those may differ from other states.
The Basics of Maryland Tax Sales
Maryland is a tax lien state, with no tax deed sales, and property taxes are collected at the county level. Counties are also where all tax sales occur, through auctions that may be in-person or online, depending on the county. The key to understanding Maryland tax sales is to realize that each county has its own particular and slightly different procedures. That makes it vitally important that you check with each jurisdiction where you want to participate in an auction, to gain a clear understanding of their rules. One way of thinking about that is that from one county to the next within Maryland, the procedures may vary in the same way that they often vary from one state to another.
High Bid Premiums in Maryland
By state statute, the tax lien certificate has to yield at least 6%. However, that doesn’t always happen. That’s because of another statue regarding what is known as the “high bid premium.” In counties that decide to incorporate that statute, they have to state that prior to the auction. Then the basic way the high bid premium works is that you get paid the standard interest rate until bidding on the property exceeds 40% of its market value. After that, 20% of the bidding above that threshold goes into an account that doesn’t pay any interest. In these high bid premium jurisdictions, the counties can select the overall interest rate you wind up getting paid – which could range from 6% all the way up to 20%. What time in the month the clock first starts running to calculate accrued interest also varies from county to county.
Required Sale Notifications
Maryland is extraordinarily strict when it comes to the notification process and the different parties that must be notified. Counties have to give notice to delinquent taxpayers a minimum of 30 days before they can advertise a tax sale. If you are a tax certificate holder, you have to send two notices to all owners, mortgagees, and beneficiaries before filing your petition to foreclose. That stringent process can take between four and 22 months.
Taking Possession of a Maryland Foreclosed Property
After completing the proper notifications, you have the right to file a complaint in circuit court, and all interested parties have the right to redeem up until the court issues a final judgment. If you succeed at being granted the judgment and getting the deed, you then have to pay that overbid amount from the auction. But the good news is that you don’t have to pay that overbid amount unless you pursue the deed – so that capital isn’t tied up in the meantime. But neither is it earning interest, and if you do end up foreclosing, you’ll have to have the funds at-the-ready to pay the overbid amount.
The Bottom Line on Tax Sale in Maryland
The state of Maryland has extraordinary requirements of notice, and if you don’t strictly follow them your foreclosure request could be denied. The high bid premium rules are also complex and unique. Add to that the fact that each county may have its own way of doing things, and it underscores the need to do your homework before investing in Maryland tax sales. Fortunately, James Truitt provides a great summary of the tax sale process – with keen emphasis on the tax foreclosure requirements − in his white paper and podcast interview with Brian Seidensticker. You’ll can also learn more about Maryland’s tax sales by listening to the interview with Charles Gormly.
