The difference between the purchase price and the opening/minimum bid of a property at auction. After bidding down the interest rate, bidders will frequently bid a premium in order to win a tax lien or tax deed. In New Jersey, the premium is kept by the municipality and returned to the investor upon redemption of the lien, if the lien is redeemed within 5 years. If the lien is not redeemed within 5 years, the premium is forfeited. In some states, you receive the premium, or “over bid”, with interest or penalties when the lien or deed is redeemed. In other states, you do not get your premium back when the lien or deed is redeemed. The term premium is also used to refer to an amount over the face value paid for a tax lien when purchasing it by assignment from another investor.

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