A lien auction is a sale of assets to recover overdue debts, including property taxes, income taxes, and utility bills. Liens prevent the transfer or sale of property until the debt is resolved, and assets may be sold at a lien auction to recover the debt. There are two types of title deed auctions, and pawn auctions can offer goods at a fraction of the market price but are sold as-is without refunds.
A lien auction is a sale of property or assets that is held to satisfy overdue debt, classically in the form of unpaid property taxes. Lien sales may also be held to cover unpaid income taxes, utility bills, and other forms of financial delinquencies. Depending on where you are in the world, lien sales may be held on a regular basis, usually near the courthouse steps, reflecting an age-old tradition of debt collection and filing for bankruptcy on the steps of a regional court to formalize the process.
Liens are legal instruments that are used to collect debts. When a lien is enforced on something such as property, it means that the property cannot be transferred or sold until the lien has been resolved. Liens may be levied on homes, cars, and personal property, and if the debt is not satisfied, these assets may be sold at a lien auction supervised by a government official, with the object of the auction being to recover the debt .
Assets such as cars and machinery are usually sold outright at a lien auction, meaning that once sold, the new owners take possession and the former owner has no recourse. The agency initiating the auction often takes inventory of the merchandise and arrives at an estimated value, using that value to set up a reserve for the auction, ensuring enough money is recovered to cover the lien.
There are two types of title deed auction: a title deed auction and a certificate of pledge auction. In a deed auction, the buyer pays off the overdue debt and takes possession of the property. In an escrow auction, the buyer pays off the debt, and the property owner is required to repay the buyer, often at a very high interest rate. If the buyer fails to repay the debt, the certificate holder can take possession of the property.
Some people like to participate in pawn auctions because they can be a great way to get things very cheap. Since the goal is recovery of a debt, rather than maximizing the sale price for profit, the contents of a lien auction can be available at a fraction of the current market price. However, goods purchased in a lien auction are sold as-is, without buyers usually having an opportunity to inspect them. Buyers are not eligible for refunds if they purchase damaged or useless goods at a lien auction, so it pays to be careful about your spending at lien auctions.
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