Real Estate Journal Online

In Marion County, Indiana, tax lien sales are used to help the county government recoup losses when property owners fail to pay their taxes. Unfortunately, the system is “backing up” as unsold, delinquent properties pile up debt and fail to move at the auctions[1]. For example, one structurally unsound, vacant motel property has outstanding taxes in the sum of $70,000. Not surprisingly, it did not sell at the last auction and now must wait until a tax surplus sale in order to have its debt cleared and be offered at a more “reasonable” price. Furthermore, if the properties appraise high enough, then the city-county council in the area may opt to refuse to approve a tax title deed, which erases back taxes and liens before the auction so that buyers can bid directly on the property. Of the 3500 properties currently in the surplus pool, probably only 200 or so will be included in the tax surplus sale.

Many tax lien investors like surplus sales because they can get steep discounts on properties and buy the deeds directly rather than buying tax liens and then waiting months or years to redeem the liens or foreclose on the properties. However, the value of these properties is likely to fluctuate far more, making these purchases higher risk in some cases since they may be damaged or otherwise “handicapped.” Do you personally like tax surplus sales?

Thank you for reading REJournalOnline’s Tax Deeds Investment Newsletter!

Let us know what type of tax lien or tax deed sales you like best.

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[1] http://blogs.indystar.com/starwatch/2011/03/18/3500-properties-waiting-for-tax-surplus-sale/

In Madison County in Alabama, about 176 property owners had their properties sold at a tax lien auction on the courthouse steps last year. However, just because someone else had those liens in hand did not mean that the properties were lost to their former owners or that the former owners would necessarily pay hefty interest and fees. That is because in Alabama, property owners whose delinquent property taxes have led to the sale of their properties at auction have five days from the date of the auction to pay their taxes. In Madison Country, that means that only about 1 in every 2,000 delinquent property owners actually loses their home in an auction because most owners pay their property taxes once they are notified that the property has been sold[1].

Lynda Hall, the county tax collector, says that her office in particular goes “the extra mile” to reach people and give them every chance to pay their property taxes. In fact, last year of the 3, 196 property owners originally on the delinquent tax list, only 176 properties ever went to auction. Auction buyers who buy liens that are redeemed by owners receive a refund, or the original owners have three years to redeem the lien by paying the auction buyer for the note and interest.

Given the massive lengths Hall goes to in order to reach delinquent owners, this seems that Madison County liens that actually make it to auction might be a better risk for investors than those in other states or counties. Would you invest in tax liens in Madison County, AL, or aim elsewhere?

Thank you for reading REJournalOnline’s Tax Deeds Investment Newsletter!

Let us know your favorite tax lien investing spot in the space below.

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[1] http://blog.al.com/breaking/2011/03/post_579.html

Arizona property owners who do not live in their Arizona properties will face property tax hikes in the coming year[1]. The state plans to send out affidavits that must be signed and returned by homeowners inhabiting the property in question in order for those homeowners to continue to benefit from a state subsidy that cuts property tax bills by up to $600 a year. Through this affidavit system, the state hopes to eliminate cuts what some experts believe may be a full quarter of rental owners whose homes have been either deliberately or accidentally misclassified as primary residences. Second homes, which experts estimate make up 6.5 percent of Arizona homes, also are ineligible for the tax break.

Critics of the move say that many homeowners will misunderstand or just plain lose the affidavit and end up suffering as a result. However, in order for anyone to retain these tax benefits, say legislators, those people who are “wrongly” claiming the rebate must begin to pay. Otherwise, property taxes as a whole will rise. This could have significant ramifications for the tax lien investing community in the coming year as homeowners and property owners face dramatically increased tax bills.

Thank you for reading REJournalOnline’s Tax Deeds investment Newsletter.

Let us know if you like the looks of Arizona for tax lien investing right now.

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[1] http://www.azcentral.com/business/consumer/articles/2011/03/14/20110314arizona-property-tax-hikes.html

Yesterday, the San Francisco Board of Supervisors unanimously approved a plan to auction off properties of city tax evaders[1]. However, they’re going to be nice about it. Last May the city notified 117 private property owners that if their local taxes were not paid, their properties would be sold at auction[2]. The city plans to do so – with minimum bids starting at the amount of delinquent taxes and other fees owed – but anything in excess will be turned over to the delinquent former property owner. City officials expect the sale to bring in $1.1 million. Property owners can pay off the debts up until the day of the auction.

More and more cities that have previously avoided tax auctions and tax foreclosures are now holding these events in order to bolster their budgets. Are you as a tax lien or tax deed investor benefiting from this change?

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Let us know how you feel about the increased volume of tax lien and tax deeds auctions and what it has done for your business.

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[1] http://www.nbcbayarea.com/the-scene/real-estate/SF-Plans-to-Auction-Off-Tax-Evaders-Homes-117247548.html

[2] http://sf.curbed.com/archives/2011/03/02/we_need_the_money.php

If you are reading this blog and learning about tax liens, then you are probably getting pretty fired up about the major opportunities in this real estate investing arena. However, if you live in an area – or wish to invest in an area – that only holds tax lien or tax deed sales once or twice a year (or even less frequently) then you may be wondering how to take advantage of all your new information on tax lien investing. Well, I have some good news: you can buy tax liens after the tax lien sale.

If you just missed the sale and you want to see if there is anything good left on the “roster,” then you can make a bid on any lien that did not attract interested buyers at the sale. You will have to check with your county of specific interest to find out the protocols for learning the locations of properties that are still available and submitting a “bid.” Some tax authorities will take bids from interested parties at any time, while others only take them for a limited time after the sale.

Some counties will also allow you to submit offers on properties by mail. Many tax lien investors who do this work with local real estate agents to insure that they are buying liens on good, viable properties since they cannot access those properties in person to evaluate them. As with buying tax liens “over the counter,” this method may be available to you at all times or it may only be available during certain periods of the year or for a certain length of time after the tax lien sale has concluded.

Thank you for reading REJournalOnline’s Tax Deeds Investment Letter.

Let us know how you like to buy tax liens below.

Tax lien investors who bid on liens for the purpose of making money when those liens are redeemed often want to avoid states in which bidding is accomplished not by declaring a stated amount that one will pay for a lien, but rather how little interest one will accept on the debt. After all, if a lien is “bid down” to a very low interest rate then a tax lien investor will collect less money when that lien is redeemed by the homeowner. Bid low enough, and the lien is not worth the trouble.

In order to attract tax lien investors to their auctions, states that use a bidding-down structure for their property tax auctions may install a “safety net” to keep investors interested in their properties. This safety net takes the form of a minimum penalty to the owner when the tax lien is redeemed. For example, Florida has this type of safety net: a minimum penalty of 5%. This means that if you bid on a tax lien in Florida and you win with a bid of 3% interest, then you will get an additional 5% interest on that lien as a minimum penalty. Of course, you will need to check the fine print. There may be rules governing how long the lien must be delinquent before the penalty kicks in or even on how much of the lien can be assessed for a penalty. Either way, however, the investor will get more than just the low initial interest bid.

Thank you for reading REJournalOnline’s Tax Deeds Investment Letter.

Let us know where you like to invest and why below.

While it might not have been quite as exciting as tax auctions used to be, owners of properties with delinquent property taxes are probably loving the newer, quieter, computerized bidding system that enabled tax lien buyers to quietly punch in bids on their personal keyboards rather than shouting them out and struggling to be heard[1]. The average bid at the Madison County (IL) tax auction was “just under four percent,” reported treasurer Kurt Prenzler, who ran on the promise to use this computerized system in his tax sales moving forward in order to “provide better accuracy and less chance for collusion or fraud.”

With less excitement and confusion came lower bids – including a number for zero-interest in hopes of collecting 12 percent in the second year of delinquency – and a chance for a nap on the part of at least one observer. Prenzler considered the auction to be a success, however, particularly in light of his predecessor’s controversial approach to tax auctions which, according to many observers, including picking winning bidders “more or less at random.” Using the new computerized system, results of bidding were displayed on a screen in the front of the room while tax buyers each sat quietly with their own laptop and entered their bids on their personal computers.

Do you think that computerized auctions will improve the way that tax liens are sold?

Thank you for reading REJournalOnline’s Tax Deeds Newsletter.

Let us know how you feel about computerized auctions below.

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[1] http://www.thetelegraph.com/news/tax-50927-bids-brings.html

In Des Moines, the local school board faces a potential $6.8 million shortfall in their budget for the coming school year. The sum is staggering enough that even the board’s citizen advisory committee is considering property tax hikes to resolve the problem[1]. While most members hoped to increase district property taxes somewhere between $1 and $2 million, some members want to make up the entire deficit through tax increases. “Whatever is paid by the average citizen in property taxes is very minute compared to all they pay. Property taxes are not high,” explained one board member. However, the majority of the committee wanted a lower rate of increase.

The property tax hike is the most preferred option over other options like mandatory furlough days, firings, frozen wages and reduced benefit packages. However, even if the committee is “very careful that we talk about shared responsibility for the education of our children,” members fear a strong backlash from community property owners already struggling with finances. However, as one committee member pointed out, “If the community of Des Moines doesn’t want to ante up for their school, then what’s going to happen to their property values?”

If the tax increase proves untenable, then the area could see more tax lien certificates for property going up for sale in area auctions. In Iowa, the redemption period is 21 months on tax liens and the liens can accrue up to 24 percent interest. County tax lien sales occur in June.

As a tax lien investor, do you monitor your target investing areas for property tax increases?

Thank you for reading REJournalOnline’s Tax Deeds Newsletter.

Tell us your favorite strategy for spotting areas primed for tax lien investing in the comments area below.

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[1] http://www.desmoinesregister.com/article/20110220/NEWS/102200340/Property-tax-hike-favored-to-plug-Des-Moines-school-district-s-budget-hole

In Illinois, tax lien auctions will now be taped as part of an initiative to “guarantee fairness” at local tax auctions. The bill, proposed by state senator Bill Haine, includes legislation to require that all tax sales be videotaped and that will prevent bidding from culminating in a tie[1]. Illinois auctions have faced scrutiny recently due to practices that allegedly “discouraged free bidding at lower rates.” Lawmakers are concerned that there is no policy in place permitting auctions to be reviewed, and believe that the mandatory tapings could help resolve the issue.

The impetus for the bill is a controversial investigative report by the Bellville News-Democrat that alleged that a former county treasurer was conducting tax auctions in such a way that liens could be arbitrarily awarded to bidders at higher interest rates than might have been appropriate[2]. In Illinois, bidders “bid down” the interest rate on the liens and the lowest bidder gets the lien. However, in Madison County, Fred Bathon allegedly was simply starting the bidding and then awarding liens to whomever appeared to have shouted out “18 percent! [the max interest charged in Illinois on tax liens]” first.

Interestingly, in addition to increasing transparency of the process through taping, the new legislation allows for taxes to be “forfeited” if there is a tie between two bidders.

Do you think that this is a good bill or should the Madison County case be handled individually rather than through statewide legislation?

Thank you for reading REJournalOnline’s Tax Deeds Investment Letter!

Please leave your comments and questions below.

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[1] http://www.bnd.com/2011/02/11/1586935/legislation-seeks-to-tighten-up.html

[2] http://www.bnd.com/2011/02/10/1585369/reporters-to-receive-award-for.html