Minnesota Tax-Forfeited Land Sales: How the Auction Works

Minnesota does not sell tax lien certificates to investors, so there is no interest rate to earn from the county. Instead, the state takes title to tax-delinquent property through a process called forfeiture, and the county then sells it at a public auction. For an investor, that auction is the main way to buy tax-delinquent property in Minnesota. Here is how the process works under Minnesota Statutes Chapters 281 and 282.

How Tax Forfeiture Works in Minnesota

When property taxes go unpaid, the county goes to court for a tax judgment. The property is then sold to the state, and the owner’s redemption period starts. For most property, that period is three years from the date of the sale to the state. A shorter one-year period applies to certain non-homestead land in targeted communities, and a court can cut the period to five weeks for some abandoned or vacant properties.

Anyone with an interest in the parcel can redeem during that time by paying what is owed: the amount the parcel was bid in for, plus later delinquent taxesProperty taxes that remain unpaid past the due date, which may result in penalties, interest, and eventually a tax lien being placed on the property., penalties, costs and interest. If nobody redeems, the county gives notice, and the redemption period ends 60 days after that notice is given and proof is filed. Absolute title then passes to the state, and the county auditor records a certificate of forfeiture.

Forfeiture clears most liens and claims on the property. A few things survive, including federal redemption rights, easements and rights of way held by people who are not interested parties, and real covenants of record at the time of forfeiture.

The County Auction

After forfeiture, the county must first offer the parcel at a public auction. The sale has to happen within six months of the forfeiture certificate being filed, or of the date the occupant leaves, whichever is later. The county sells to the highest bidder and can run the auction online. It must publish notice at least 30 days before the sale begins.

Minnesota uses a two-step price. For the first 30 days, the parcel cannot sell for less than its estimated market value from the most recent assessment. If no one will pay that, the price drops to the minimum bid, which is the delinquent taxes, special assessments, penalties, interest and costs on the parcel. Sale dates are set by each county, so there is no single statewide auction date. Check the county auditor’s website for the parcel list and schedule, and ask how payment is due at the initial auction.

Parcels That Don’t Sell

If no one pays the minimum bid, the state is treated as having bought the parcel through a credit bid. The parcel stays in trust for the local taxing districts under the county’s management, and the county can later sell it under Chapter 282. The county board appraises the property, and the sale generally cannot be for less than the appraised value. Some counties list these parcels with a real estate broker. This is the closest Minnesota comes to an over-the-counter purchase, and the rules and timing vary by county.

On these later sales, a buyer who does not pay cash must put down at least 10 percent of the price. The balance is paid in no more than ten equal annual installments, and the contract cannot run longer than ten years. The unpaid balance carries interest at the rate set by Minnesota law, so ask the county auditor for the current rate.

Owner Rights and Repurchase

The former owner has more than one chance to keep or recover the property. Before the auction, an interested party can repurchase by paying the delinquent taxes and assessments plus penalties, interest and costs. After forfeiture, the owner at the time of forfeiture, the owner’s heirs or representatives, and others with a right to pay the taxes can apply to repurchase within six months of forfeiture, but that requires a county board resolution finding hardship or that the repurchase serves the public interest. A prior owner can also buy a parcel at least one week before a sale for the greater of its appraised value or the amount owed. Because of these rights, a listed parcel can drop out before the sale.

Surplus Proceeds

Minnesota treats surplus money differently from many states. The county puts the minimum bid in its forfeited tax sale fund. Anything the parcel sells for above that amount is surplus, and interested parties such as the former owner or a lienholder can claim it. It does not go to the buyer. The county must send notice and a claim form within 60 days of the sale, and claims are due within six months of the date the notice is first mailed. If several people claim, the money is divided by each claimant’s interest. Unclaimed surplus returns to the county’s forfeited tax sale fund.

Who Can Bid

County auditors, treasurers, assessors, county attorneys and certain other county officials and their staff cannot buy forfeited property in their own county, directly or through someone else. A county auditor can also bar other buyers, including someone who owns another parcel in the county with delinquent taxes, had a rental license revoked in the past five years, or had a contract to buy a forfeited parcel canceled in the past five years.

What Investors Should Check

Before you bid, order a title search, confirm which easements, covenants and special assessments stay with the parcel, and visit the property in person. Check the county’s records for current taxes and the condition of any buildings. Ask a real estate attorney whether a quiet title actionA lawsuit filed to establish clear ownership of a property and resolve any disputes or claims against the title. makes sense for the title you would receive. Do your due diligenceThe research and investigation process an investor conducts before purchasing a tax lien or tax deed to evaluate the property and assess risk. on every parcel, and see our tax lien states vs. tax deed states map to compare Minnesota with other states.

Minnesota law changes over time, and each county runs its sale differently. Confirm the current rules, dates and minimum prices with the county auditor and a qualified attorney before you bid.