A lien auction is a sale of property or goods which 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 charges, and other forms of financial delinquencies. Depending on where in the world one is, lien sales may be held on a regular basis, usually near the courthouse steps, reflecting an ancient tradition of recovering debts and declaring bankruptcy on the steps of a regional courthouse to make the process official.
Liens are legal instruments which are used to collect debts. When a lien is enforced on something like a property, it means that the property cannot be transferred or sold until the lien has been resolved. Liens can be levied on houses, cars, and personal property, and if the debt is not satisfied, these goods can be sold at a lien auction supervised by a government official, with the goal of the auction being a recovery of the debt.
Goods such as cars and machinery are usually sold outright at a lien auction, which means that once they sell, the new owners take possession and the former owner has no recourse. The agency initiating the auction will often inventory the goods and arrive an estimated value, using that value to set a reserve for the auction, ensuring that enough money is recovered to cover the lien.
There are two types of property lien auction: a deed auction, and a lien certificate auction. In a deed auction, the buyer pays the overdue debt and takes possession of the property. In a lien certificate auction, the buyer pays the debt and the property owner is required to pay the buyer back, often at a very high rate of interest. If the buyer fails to repay the debt, the certificate-holder can take possession of the property.
Some people like to attend lien auctions because they can be an excellent way to obtain things very cheaply. Since the goal is recovery of a debt, rather than maximizing sale price for profit, the contents of a lien auction may be available at a fraction of the going price on the market. However, goods purchased at a lien auction are sold as-is, with buyers usually not being given an opportunity to inspect them. Buyers have no entitlement to refunds if they purchase damaged or useless goods at a lien auction, so it pays to be careful about spending at lien auctions.