Worked Example ·
Tax Lien Max-Bid Worksheet: Rates, Premiums and Deeds
Build a tax lien underwriting worksheet with rate floors, premium ceilings, cash reserves and hypothetical tax-deed calculations.
A tax lien max-bid worksheet should answer three questions before an auction starts: what cash must leave the account, what cash could come back under several timing assumptions, and which unresolved facts prevent a bid. The auction mechanism determines the control you enter. In a rate bid-down sale, the stopping point is a minimum acceptable interest rate. In a premium sale, it is a maximum additional cash payment. A tax deed needs a property acquisition budget.
Use the worksheet below as a structure for your own inputs. Every dollar amount and modeled rate in the worked examples is hypothetical. The examples show arithmetic, not an available certificate, a current statutory rate, an expected redemption date or a recommended return target. Keep actual county calculations and approved assumptions in separate fields.
1. Identify the bid mechanism before entering a number
| Sale mechanism | Auction control | Underwriting output |
|---|---|---|
| Rate bid-down certificate | Lowest interest rate you will accept | Minimum rate and maximum total cash exposure |
| Premium-bid certificate | Amount above the certificate base | Maximum premium, including its recovery and interest treatment |
| Tax deed | Dollar purchase bid | Maximum bid after property, title and exit costs |
Arizona section 42-18114 awards the lien to the purchaser accepting the lowest interest rate and starts bid-rate interest on the first day of the following month. Florida section 197.432 also uses lowest-rate bidding, in quarter-percentage-point increments. Florida section 197.472 has a minimum-interest provision with an exception for zero-percent certificates. These rules belong in jurisdiction-specific calculations; a generic days-divided-by-365 formula can miss them.
- Arizona: successful purchaser and interest accrual
- Florida: certificate bidding, section 197.432
- Florida: certificate redemption, section 197.472
2. Build one worksheet row per candidate
| Field group | Inputs to retain |
|---|---|
| Identity | County, sale date, parcel ID, certificate or lot ID, sale type, official source URL and retrieval date |
| Cash at purchase | Certificate base or deed bid, premium, fees, deposit credit and remaining payment due |
| Cash later | Subsequent-tax reserve, servicing, legal or title work, property holding costs where relevant |
| Recovery assumptions | Interest-bearing base, bid rate, refundable amounts, timing scenarios and unreturned costs |
| Decision | Approved rate floor or cash ceiling, open questions, reviewer and last verification time |
Record deposits twice only when they are genuinely separate costs. A deposit credited against the purchase is part of the purchase funding, not another expense. Keep refundable funds outside the profit calculation while still showing when cash is tied up. Distinguish paid expenses from reserves; a reserve protects liquidity but becomes an expense only if the underlying cost is incurred.
3. Rate bid-down example: calculate a floor
Assume a hypothetical certificate has a $5,000 interest-bearing base, $50 of unrecovered costs, no premium and exactly 12 months of simple interest under the assumed calculation. At an 8% bid rate, gross interest is $400. Modeled net profit is $400 − $50 = $350. Total cash deployed is $5,050, so the modeled holding-period return is $350 ÷ $5,050 = 6.93%, before income taxes.
If the same assumed calculation pays only six months of interest, gross interest is $200 and modeled profit is $150, or 2.97% of deployed cash. That is a six-month result, not an annual yield. If the worksheet requires $300 of net profit over the assumed full year, the arithmetic rate floor is ($300 + $50) ÷ $5,000 = 7%. Adjust to permitted bid increments and recalculate for the actual accrual rules before using a floor.
4. Premium example: test early redemption
Boulder County states that its premium earns no interest and is not returned. That changes the cash-flow model: the premium is a cost to recover from other proceeds. Do not apply that treatment automatically to another state or county. Record the applicable rule next to the premium input.
For a hypothetical $5,000 interest-bearing base, assume a 10% simple annual rate, a $300 nonrefundable premium and $50 of other unrecovered costs. The 10% is an illustration, not the current Boulder sale rate. Initial outlay is $5,350. At 12 modeled months, $500 of interest produces $150 of net profit. At six modeled months, $250 of interest produces a $100 loss.
| Assumed interest period | Interest | Net profit after $350 costs | Return on $5,350 outlay |
|---|---|---|---|
| 3 months | $125 | −$225 | −4.21% |
| 6 months | $250 | −$100 | −1.87% |
| 12 months | $500 | $150 | 2.80% |
For a chosen $150 profit requirement at 12 modeled months, the maximum premium is $500 interest − $50 costs − $150 required profit = $300. At six months it falls to $50. If a scenario produces a negative premium ceiling, paying even zero premium does not meet that scenario’s profit requirement. Show the unfavorable case alongside the selected ceiling.
5. Tax deed example: underwrite the property exit
Florida section 197.542 provides for sale to the highest bidder and payment requirements. A certificate-rate worksheet cannot price that purchase. Use separate acquisition, possession, property and resale assumptions. An estimated resale value does not establish clean title, physical condition or the ability to obtain insurance.
Assume a hypothetical $80,000 resale price, $8,000 selling costs, $12,000 repairs, $6,000 holding and title-related costs, a $4,000 contingency and a $15,000 required profit cushion. Before any bid-dependent auction charges, the maximum purchase bid is $80,000 − $8,000 − $12,000 − $6,000 − $4,000 − $15,000 = $35,000. If supported resale value falls to $70,000, the same assumptions reduce that ceiling to $25,000. Add any percentage-based buyer charges to the formula rather than absorbing them silently.
6. Approve the assumptions, then export the limit
- Match the candidate to the actual sale and confirm it has not been removed or redeemed.
- Resolve parcel identity, title, access and material property questions before approving exposure. An unknown cost is not zero.
- Run early, base and delayed recovery scenarios; include additional cash requirements without assuming they are all recoverable.
- Reconcile the approved limit with available cash, other live bids, deposits and payment deadlines.
- Save the reviewer, source versions and reason for the ceiling. A changed rule or amount requires a fresh review.
Accrella can keep research, review notes and bid preparation connected. Carry the approved ceiling or rate floor into the working bid record, and compare the exported file against the auction host’s fields. Preparing a worksheet or bid sheet does not submit a bid. After a purchase, preserve the actual award and payment evidence so later performance can be compared with the assumptions you approved.
Sources and review method
Recommendations reflect the workflows described in these sources. Vendor features, plans and county availability can change; confirm the current scope with each provider.