Iowa

What Iowa sells, and when

Iowa counties sell a tax sale certificate of purchase. The county treasurer offers every parcel with delinquent taxes at a public sale held annually on the third Monday in June; if there is good cause, the treasurer may pick a different day in June (§ 446.7(1)). Each parcel is offered separately for the total amount due — taxes, interest, fees and costs (§ 446.15) — and one certificate covers one parcel (§ 446.29).

The delinquent tax lien travels with the certificate, whether you bought it at the sale or took it by assignment, and the lien expires when the certificate expires (§ 446.16(3), § 446.29). That second half is the part that bites, and it comes up again below.

Not every delinquent parcel is on the list. Parcels owned by the state or a political subdivision, parcels on which the county already holds a certificate, and parcels subject to a pending municipal infraction or a nuisance or abandonment petition (chapters 657 and 657A) are held back, and a sale of the government-owned ones is void from the start (§ 446.7).

To bid you must register. The treasurer may charge a registration fee, capped so the fees together do not exceed the cost of running the sale (§ 446.16(2)). An entity rather than an individual also needs a federal tax identification number and either a registered agent on file with the Secretary of State or a verified statement under chapter 547 filed with the county recorder (§ 446.16(4)). Sort that out weeks before June, not the week of the sale.

You bid a percentage of the property, not a rate

§ 446.16(1) makes the purchaser the person who will pay the total amount due for the smallest percentage of the parcel. The percentage you name is not a discount and not a yield: it is the undivided interest you would receive if the certificate ever became a treasurer's deed. The floor is 1%.

Two things follow. First, the money you put up is the same whatever you bid — the total amount due — so there is no overbid and no premium, and therefore nothing left over for the former owner to claim. We cover what that means for owners in Iowa tax sale excess proceeds. Second, a bid below 100% only changes anything in the rare case that ends in a deed, and in that case it leaves you co-owning the property with its former owner.

When two or more bidders offer the same smallest percentage, the treasurer must use a random selection process to pick who gets the certificate (§ 446.16(1)). In a room where everyone bids the same number, the draw is what decides your allocation, not your bid.

2% a month, and how the month is counted

The redemption amount is what the parcel sold for, including the certificate fee, plus interest of two percent per month from the month of sale (§ 447.1(1)). That is 24% a year, simple rather than compounding, and it is the same on every certificate in every county.

The counting rule is generous to the holder: each fraction of a month counts as an entire month. The interest has to be at least one dollar and is rounded to the nearest whole dollar. For the owner, payment must reach the treasurer — or go through the treasurer's authorised website — by the last day of the month, or another month's interest is added; if that day falls on a weekend or holiday, the deadline moves to the first business day of the next month (§ 447.1(1)).

Because the rate cannot be bid down, the fixed 24% is the attraction and also the reason small certificates draw a crowd. The real return on an Iowa certificate is decided by how long it stays out and how much of your capital is working, not by anything you do at the auction.

Subsequent taxes: where the 2% keeps working

As the holder you may pay the parcel's taxes for later years. You can start one month and fourteen days after an installment becomes delinquent, and each payment earns the same 2% a month from the month you pay it (§ 446.32, § 447.1(1)).

The timing rule is strict. For a month's interest to accrue, the payment must be received and recorded by 5:00 p.m. on the last business day of the month, or entered through the treasurer's website; the treasurer may set a different cut-off, and the postmark is never used to decide it (§ 446.32). Mail it on the 29th and you may have lent a month for nothing.

Paying the subsequent taxes is also defensive. A treasurer's deed is issued subject to the rights of anyone holding a certificate from a later tax sale on the same parcel (§ 448.3(1)). Leave next year's taxes unpaid and they can go to another bidder, whose interest survives your deed.

The redemption window only ends when you end it

Most summaries say Iowa owners have "one year and nine months" to redeem. That is not quite what the statute says. After one year and nine months from the date of sale, the holder may serve a notice of expiration of the right of redemption (§ 447.9(1)). Nothing expires on its own.

The notice goes to the person in possession and the person in whose name the parcel is taxed, by both regular mail and certified mail, and also to any mortgagee, contract vendor, lessor with a recorded lease, anyone else with an interest of record, and the city where the parcel sits (§ 447.9(1)–(2)). Service is complete only when you file an affidavit of service with the treasurer, and the right of redemption does not expire until ninety days after service is complete (§ 447.12).

So the realistic minimum is twenty-one months plus the time to prepare notice plus ninety days — roughly two years — and the maximum is whatever you let it be, up to the cancellation deadline. The shorter clocks are exceptions: nine months for a parcel bought at a public bidder sale under § 446.18, and three months for the abandoned-property and nuisance sales of § 446.19A and § 446.19B (§ 447.9(1)).

The costs of serving notice, the certified mail, any publication and a record search are added to the amount the owner must pay to redeem. If you are not the county, the search must be done by an abstractor in the Iowa title guaranty program or an Iowa-licensed attorney, and the recoverable cost is capped at $300 (§ 447.13(1)). Costs are filed with the treasurer after the affidavit and before redemption; costs not filed by then are not collected by the treasurer (§ 447.12, § 447.13(2)).

Getting the deed, and the two deadlines that cancel your certificate

If the ninety days pass with no redemption, you return the certificate and pay the deed fee — $25 per deed — and the recording fee, and the treasurer records the deed before handing it to you (§ 448.1(1)). The deed vests the former owner's right, title and interest in you, subject to restrictive covenants in the chain of title and to later tax sale certificates (§ 448.3(1)).

Two deadlines can cost you the certificate outright. If you have not filed an affidavit of service within three years of the sale, the treasurer cancels the sale from the county system (§ 446.37). And once the redemption period has expired, you have ninety calendar days to return the certificate and pay the fees, or the treasurer cancels it (§ 448.1(2)).

Service defects are not a technicality here. If the owner of record or the taxpayer shows they were not served as § 447.9 requires, the deed is void. A lienholder who was not served cannot void it, but the deed stays subject to that person's interest (§ 448.3(2)).

Where the list is published, and what happens if nobody bids

The treasurer mails each owner a notice of the date, time and place of the sale by first-class mail no later than 1 May, and publishes the sale once in at least one official county newspaper between one and three weeks before the sale day. The publication lists each parcel, the name it is taxed in and the single sum due, and marks public bidder items with an "s" or an asterisk (§ 446.9(1)–(2)). That newspaper listing and the treasurer's office are where the list officially lives.

Parcels nobody buys at the June sale are not dropped. The treasurer adjourns the sale to a new date no more than two months away, and keeps adjourning at intervals of up to two months until the next annual sale or until everything is sold (§ 446.25). A parcel that has been offered for a year or more without a buyer goes into the public bidder sale, held on the day of the regular sale (§ 446.18).

At the public bidder sale, if there is still no bid, or only a bid for less than the total amount due, the county bids the total amount due itself and holds the certificate without paying any cash (§ 446.19(1)). That is why the owner of a public bidder parcel gets only nine months before notice can be served, not twenty-one (§ 447.9(1)).

County-held certificates do not have to wait for June. The county may assign them for the total amount due, or compromise the amount and assign, by written agreement and a $10 transaction fee; the three-year cancellation clock then runs from the date the assignment is recorded (§ 446.31(2)). Between private holders an assignment costs $100, and that fee is not added to the redemption amount (§ 446.31(1)).

Six ways people lose money here

1. 1. Bidding less than 100% without meaning it

   The percentage is the undivided share you get at deed (§ 446.16(1)). Win at 60% and a deed makes you a 60% co-owner with the person who just lost the property.

2. 2. Reading 21 months as the deadline

   One year and nine months is when you may serve notice (§ 447.9(1)). The right to redeem only ends ninety days after the affidavit of service is filed (§ 447.12).

3. 3. Letting three years go by

   No affidavit of service within three years of the sale and the treasurer cancels it (§ 446.37). The certificate does not keep earning forever.

4. 4. Paying subsequent taxes by post at month-end

   Interest for the month accrues only if the payment is recorded by 5:00 p.m. on the last business day; the postmark does not count (§ 446.32).

5. 5. Serving notice one way, or on the wrong people

   § 447.9 requires regular and certified mail to the occupant, the taxpayer and every interest of record. Miss the owner and the deed is void (§ 448.3(2)).

6. 6. Forgetting to file your costs

   Notice and search costs are added to the redemption only if filed with the treasurer before the owner redeems (§ 447.13(2)), and the search is capped at $300.