Record-Setting Tax Lien Sale Indicates Tough Economic Times
January 6th, 2011
New Jersey knows all about tough economic times, but tax lien sales numbers seem to indicate that things are getting even tighter, according to Al Stanley, a local tax collector in Galloway, New Jersey whose township recently held its biggest tax lien sale ever, selling more than 1,200 liens for $1.6 million[1]. Stanley reports that the number of liens being sold each year has been on the rise since 2004 – the beginning of the end of the real estate boom by many analysts’ timelines – and that the number of liens sold has more than doubled since that time. Prior to 2004, only about 500 liens were sold each year.
New Jersey is a tax-lien state, which means that the purchasers of the tax liens are not purchasing the actual deed to the property, but only the ownership of the lien itself. By paying off the tax lien, the investor receives ownership of the note on the property. They have to pay the taxes again for the next two years – or manage to get the owner of the property to redeem the note, plus interest – before they can actually foreclose on the property. “The owner can pay off the lien at any time [with] back taxes plus interest,” said Stanley, pointing out that the city does not profit from these sales, but simply collects the taxes owed on the property.
Stanley’s township, Galloway township, sold all but 211 of its tax liens in the December sale. It is Atlantic County’s fastest growing community at this time. As it becomes more difficult to find properties with equity in them using “traditional” real estate investing strategies, more and more investors are turning to property tax lien investing because ownership of a tax note places the owner of the note at a top priority level even over the mortgage holder and enables the tax lien note holder to foreclose on the property and take ownership instead of the mortgage holder. It is possible to gain possession of a property – if you are patient – for only a few hundred or a few thousand dollars.
Like Stanley in this article, many cities are trying to downplay their tax lien auctions because of the negative media coverage of such events. Does this make you more or less eager to invest in tax liens yourself?
[1] http://www.shorenewstoday.com/index.php/galloway-twp/galloway-twp-general-news/7252-16-million-tax-lien-sale-sets-record.html
January 7th, 2011 at 11:50 AM
Similarly, the boom and bust in Maricopa County (Phoenix area), Arizona, has been playing out in increasing delinquent property taxes. Year over year delinquencies have grown at the rate of about 45% for the last three years, so that this February’s auction is likely to offer close to $100 million in delinquent taxes for the first time ever.
For more information, check the website of the Maricopa County Treasurer and cpexchange.com.