Alabama Tax Sale Redemption
I've posted about this before, but it was in the context of a longer article. I want to make sure everybody understands this concept, so it is short and to the point.
Under Alabama law, the tax sale purchaser receives a certificate after the auction. That entitles him to possession of the property, and earning the 12% redemption income.
Three years later, you can turn in your certificate and claim a deed. Or, you can buy a deed directly from the state if the auction was more than three years earlier.
Even though you have a tax deed, the owner could still have redemption rights! The rule in Alabama is that the former owner has redemption rights pretty much forever, until the investor takes possession of the tax sale property. At that point, the former owner then has three years to redeem.
Comments (15)
Hi @Denise Evans i purchased tax sell on a abandon property. the state says a bank is the last owner. Do i need to contact the Bank or do i need to research a little further to see who the bank had the mortgage with.
Roosevelt Hunter, over 5 years ago
I don't know how is this post but I have a question, I saw people selling cheap houses in Alabama, they say is a tax deed sale and that you can take possession and rent it out for profit, that means they won the auction and now have the certificate and they are selling that certificate to take possession of the property? Can they do that?
Alvaro Leis, over 5 years ago
Denise- This is my first time trying to purchase. I received an offer letter to purchase a property that was sold to the state.. The representative advised me, it could be liens on the property. Can you assist me with this process?
T. Jones
Tameka J Jones, over 5 years ago
Hello @Denise Evans: I'm currently awaiting tax deeds for two properties I recently purchased. Both properties have occupants; however, taxes haven't been paid in over 3 years on one home and 5 on the other.
1. Can I file for a quiet deed immediately upon receiving the paperwork?
2. How do I insure the property in the case the current occupants cause damage?
Thanks greatly for all your help,
LeKisha-
Lekisha S Boswell, about 6 years ago
@Lekisha S Boswell, you must burn off three years of judicial redemption rights before filing quiet title, if you obtain your tax deed from the state.
You are able to get casualty insurance, because you own the property. If they redeem, they will have to reimburse you for the premiums, plus 12% per year interest.
Because you have a tax deed, you can file an ejectment lawsuit immediately. if they redeem, they will have to pay your legal fees for the lawsuit, in addition to all other charges. If you do not gain exclusive possession of the property within three years of the tax deed, you will lose all of your rights and the former owner will get the property back and they will not have to pay you a dime.
Denise Evans, about 6 years ago
@Denise Evans thank you greatly for promptly responding! Just two additional questions.
From your personal opinion is it better to file the ejectment immediately upon receiving documentation or should I attempt to contact the owner first? Also, if the right to redeem is three years for a deed are there benefits of purchasing a tax certificate the same?
Lekisha S Boswell, about 6 years ago
Its a matter of tactical decisions regarding how long you wait. Some people prefer to wait a few months because it might allow them to also sue for damages for mesne profits, which are available only after the tax deed date. That is the reasonable rental value of the property from tax deed date until ejectment order. Other people prefer to eject right away and get possession as quickly as possible. it is not clear that a judge will always award you what you want by way of mesne profits.
Denise Evans, about 6 years ago
You should also visit the property regularly to check on it. Keep the grass mowed or road frontage bush hogged. Clean up broken branches along road. Put your phone number on the posted signs. Visit the neighbors, or send letters to them if not practical to visit. Tell them you bought the property at the tax sale. Ask them to let you know if they notice trespassers, or if they know someone interested in renting the property. Your possession must include an element of "notoriety," which usually means making sure the neighbors know about you. If the property is not out in the country, rent it out (even if only for $0 rent) to groups for garage sales and car washes and other fund raisers. Of course, if you are able to rent it for actual money, then do that.
Keep a journal with a record of all activities, including dates and times. Take a couple of photos every time you are at the property.
Denise Evans, over 7 years ago
@Denise Evans
I bought a home via a state tax sale. The home was sold to the state of Alabama in 2011. I received a tax deed for this property. Am I legally able to fix and restore the home now to sell or would I need to file any additional paperwork with the courts to make sure that the previous owners can't come back and try to redeem? Should I get a quiet title deed? Can you advise on the order of steps that I should take? Please advise on this with your GREAT expertise.
Thanks
-Alycia
Alycia Robinson, about 7 years ago
Jason Gay, over 7 years ago
Jason Gay, over 7 years ago
@Doug MortonYour tax deed has no warranties. Former owners and ilenholders will have redemption rights. Depending on what you paid at auction, it might make sense to acquire those rights and not worry about redemption. Redemption often occurs not from prior owners, but from investors buying up rights of former owners and snatching your deal away from you.
Denise Evans, over 7 years ago
Good information. I bought an REO property at private auction (not paid for yet) and then found that the state of Alabama bought the property at the tax sale back in 2011. It has now been over three years (5 now) since they bought it. I have submitted the request to buy it from the state and am waiting on the quote. I believe I am buying the tax deed from the state and then from the auction I am buying the property via a quitclaim deed. Do I even have to spend the money on the auction purchase to get the quitclaim since the tax deed will be after the 3year right of redemption and I can apply for a warranty deed with it?
Doug Morton, over 7 years ago
Hi Jerry, yes, even vacant land must be possessed, otherwise the owner still has redemption rights. I always recommend people post land with no trespassing signs and a phone number. If appropriate, put up "for rent" signs for hunting or haying or pasture, even if you have no intention of renting it out. Just set the rent really high. Pound survey stakes in the ground every 10 or 20 feet somewhat near the approximate property line along the road frontage, and put survey flagging on the stakes. You want to give the impression of a fence, not an actual fence. These are all possessory acts that tell the world someone is claiming the property. For subdivision lots, I suggest telling the two neighbors on either side they can use the lot for a garden. Or, let the subdivision at large know they can use it for a community garden. That has the added advantage of the subdivision developer not getting tipped of that you are in possession and burning off his redemption rights, but you are actually legally in possession. Anyone who takes possession with your permission (whether a tenant or free) is the same as you being in possession.
In a nutshell, the only possession that is necessary is possession that is normal and customary for that type of property. I've seen cases involving beachfront, undeveloped, property, where the investor testified he came down a couple of times a year and camped on the land. That was enough.
Never cut the timber, though. You can't do that until you have the tax deed. Some experts are not sure you can do that even after the tax deed, unless you have quieted title. I think you can cut the timber after the tax deed, but it's based on the wording of the statute and some subtleties that go back to subtle underpinnings of real estate law and an area called "future interests." I'm okay cutting timber, but I wouldn't recommend it to anyone else.
Denise Evans, over 8 years ago
Denise - thanks for the interesting twist with Alabama tax sales. What if the property is vacant land? If the tax sale purchaser sells the vacant parcel to another person, does the original owner still have redemptive rights? What counts as "possession" in the case of vacant parcels?
Also, thanks for the the detailed information you provide in your posts.
Jerry K., over 8 years ago