I am looking for feedback on tax lien investing in AZ. I went on to the Maricopa County website and realize they have an auction coming up in February 2020. The site has already opened for registration and you can preview the sales. I looked at several properties and they seem to be occupied. I have several questions I'm hoping someone can help me with.
How would we find out if they are occupied by owners or renters? Also, if they are renters, would we simply take over the rental income? There were some that were vacant. I know in some states (like AL) you are able to rent out the property as soon as you purchase the tax lien. Does anyone know if it is the same in AZ? I would appreciate any feedback before I make bidding decisions in Feb. I plan to start with low percentage bids just to get some hands-on experience but would appreciate any feedback.
@Dan Gauthier Since you are an attorney, could you clarify the above for me? Am I on the correct track in relations to tax lien purchasing and foreclosing? I tried to self study using as many resources as possible, but clarification from you would help a lot. I do not want to put out incorrect information again. Thanks
Sure. The tax lien foreclosure statutes are A.R.S. 42-18201-18208. It's a process set out by statute and a high-level summary of the foreclosure portion is: (1) starting 3 years from the date of the tax lien sale (but not more than 10 years) and after having sent the required notice, the holder can file a foreclosure action; (2) assuming the holder can show the tax lien sale properly occurred and there has been no prior redemption, the judge orders the county treasurer to issue a treasury deed in the holder's favor, subject to right to appeal. There is no auction-bid component.
Keep in mind that the lien can be redeemed by the owner or anyone with a property interest (including another lien holder) at any time prior to the judge entering judgment in the lawsuit. Hope this clarifies.
I am not sure how you can verify occupied residence without maybe driving by. For the other questions...
I too was looking into tax liens in AZ. I am in Cochise County and had similar questions earlier this week. I recommend looking into AZ Title 42.
Arizona is a tax lien state not a tax deed state. Being a tax lien state, you are only paying off the taxes the property owner owes. That money goes to the County. You bid down the return starting at 16%, and the county awards the lien to the investor willing to take the least amount of APR on the purchased lien.
For example, a single family home in Chandler owes $6,000 in back taxes, interest and fees that is being auctioned this Feb. You bid $6,000 at 16%, I bid $6,000 at 15% and down it goes. Maricopa gets their $6,000 up front by you, the homeowner now owes you $6,000 at 4% (county collects the 12% difference when redeemed).
You only own a lien on the property now. You cannot recover your investment at the 4% rate until the homeowner sells, or refinances or whatever. You cannot force redemption until 3 additional years have passed since you purchased you tax lien, 2023. You then pay a lawyer to foreclose, and the property now goes to auction. The highest bidder gets the property, you get your $6,000 at 4% back unless you were the highest bidder.
Tax lien owners would put us at a higher priority of redemption over other liens like mortgages and second mortgages. But we are inferior to State Income and Federal Income tax liens on the property. You also run the risk of losing priority if another investor buys any future tax liens for auction on that same property.
Since you cannot redeem until 2023, the property owner may not pay taxes for those years as well. I will buy 2021's back taxes at $1,800 at 5%, someone else can do similar for 2022 and 2023. Potentially, if you do not secure your priority by purchasing all the subsequent liens, even forcing the APR down to 1% or 2%, you could run the risk of the property selling at foreclosure and not paying off your tax lien from three years ago.
Tax liens will require a good amount of liquid capital to be held for the purpose of foreclosing and winning your already "tax lien" owned property. You could run this on properties you really think will pay the liens off at the APR that is desirable for you. A lot of people are cycling their money like this.
Pima county has statistics for last few years of average APR 4-8%, only 40-70 people bidding, and 70million plus in tax liens purchased. Check out the statistics where you plan on bidding. Maricopa is online only, so there could also be more out-of-state investors. Pima and Cochise are in-person auctions.
Long winded, but I hope this answered your questions.
@Kyle W. Wow! Thank you for all of the information. I did understand how the bidding process works. However, I was not aware of all the intricate details, subsequent tax lien holders, etc. It sounds like this is too much work and risks, which I am not willing to take on as a starting investor. I would need my cash to be more fluid than what you have explained. Maybe when I have more cash and can afford to have it sit for 3 years at a possible >5% then I can come back to this idea. I appreciate your help!
@Kyle W. did a great summary for Arizona. I have been investing in tax liens in AZ since 2009. One point I want to ask Kyle - are you sure the property goes to auction after the 30 day foreclosure letter? That is not what has happened in my tax lien foreclosure cases. That is how they are done in Florida, but in AZ my experience, once the foreclosure actions is complete the lien holder who foreclosed gets the property. I have not done a foreclosure in Maricopa county, but I haven't found a statute that mentions after the foreclosure the parcel is auctioned to highest bidder.
@Laura Tabarez I apologize for my incorrect statement about foreclosure auction.
@Jerry K.You are correct. Foreclosure auction was the part that confused me the most in Arizona. After you brought this to my attention I did more research and was lucky enough to find Mohave County courts document on this. https://www.mohavecourts.com/c...
They pretty much walk you through a Tax Lien Foreclosure when filed against a single property owner in Mohave County. I assume it will be similar for other counties and multiple owners but I personally will use a lawyer for that.
This clarification has made Tax Liens much more appealing. Thank you for this Jerry, and again I apologize for incorrect information.
@Dan Gauthier Since you are an attorney, could you clarify the above for me? Am I on the correct track in relations to tax lien purchasing and foreclosing? I tried to self study using as many resources as possible, but clarification from you would help a lot. I do not want to put out incorrect information again. Thanks
@Dan Gauthier Since you are an attorney, could you clarify the above for me? Am I on the correct track in relations to tax lien purchasing and foreclosing? I tried to self study using as many resources as possible, but clarification from you would help a lot. I do not want to put out incorrect information again. Thanks
Sure. The tax lien foreclosure statutes are A.R.S. 42-18201-18208. It's a process set out by statute and a high-level summary of the foreclosure portion is: (1) starting 3 years from the date of the tax lien sale (but not more than 10 years) and after having sent the required notice, the holder can file a foreclosure action; (2) assuming the holder can show the tax lien sale properly occurred and there has been no prior redemption, the judge orders the county treasurer to issue a treasury deed in the holder's favor, subject to right to appeal. There is no auction-bid component.
Keep in mind that the lien can be redeemed by the owner or anyone with a property interest (including another lien holder) at any time prior to the judge entering judgment in the lawsuit. Hope this clarifies.
So buy a $1500 tax lien. Foreclose paying a few thousand(?) for legal fees. They pay the $1500 back prior to and you lose a lot of money and wait years to do it.
Is that really a possibility? Sounds potentially awful.
Thanks Dan, but no, that wasn't it. Mohave County Treasurer posted it just as they were advertising the upcoming tax lien sale. I saw it on my phone, making a mental note to look at it once home on a bigger screen. I got to it within a couple days but they had taken it down. From what I read of it, it was proposing changed to the foreclosure process.
@Scott Anderson I've bought tax liens in Arizona for years. I had one in Pinal county a few years back that I earned 16% interest for a few years and began foreclosure. After the foreclosure was started, the owner paid. He had to pay all of the principal, all of the interest and all of my attorney fees for the foreclosure up to that point. I had paid my lawyer $65 to do the 30 day "intent to foreclose" letter - that was not reimbursed - but all other costs were paid by the seller. I made a few thousand in interest at the 16% rate over the 3 year period.
@Jerry K. I am looking to purchase tax liens in AZ. I saw some parcel with lien open back to 2007, does this mean those liens never got redeemed? And from 2007 to 2011, the rate is 16%, and then 2012 to 2013 rate is 7%, looks like the lien holder was changed, did the first one got his/her investment back, if the property owner did not redeem, who paid him/her? And why the first holder not foreclose since she/he held more than three years? If I purchase all the back liens am I able to foreclose?
@Jerry K. I am looking to purchase tax liens in AZ. I saw some parcel with lien open back to 2007, does this mean those liens never got redeemed? And from 2007 to 2011, the rate is 16%, and then 2012 to 2013 rate is 7%, looks like the lien holder was changed, did the first one got his/her investment back, if the property owner did not redeem, who paid him/her? And why the first holder not foreclose since she/he held more than three years? If I purchase all the back liens am I able to foreclose?
2014
1302042
Open
I
00001657
2016
0
$617.48
16%
2013
1400045
Open
I
00003835
2015
0
$591.28
7%
2012
1400045
Open
I
00003835
2014
0
$554.09
7%
2011
1302042
Open
I
00001657
2013
0
$640.87
16%
2010
1302042
Open
I
00001657
2012
0
$744.45
16%
2009
1302042
Open
I
00001657
2011
0
$769.52
16%
2008
1302042
Open
I
00001657
2010
0
$383.79
16%
2007
1302042
Open
I
00001657
2009
0
$360.24
16%
Jerry is very knowledgeable with AZ and helpful, I am sure he will be back at some point to answer your question. My guess is that the property isn't worth it. *Usually* that is the reason why the tax lien holder doesn't foreclose. In states like AZ, IL and LA where there is a legal process to take ownership that involves lawyers and court costs, it can cost you 3-5K or more. A lot of times people buy liens for the interest without doing any due diligence, then when it's not redeemed they take a look at what they have. When they find out that the house has been demolished or the 2 acres of land etc is only worth 5K, it's not worth spending any more money on it and they let it go.
@Kyle W. did a great summary for Arizona. I have been investing in tax liens in AZ since 2009. One point I want to ask Kyle - are you sure the property goes to auction after the 30 day foreclosure letter? That is not what has happened in my tax lien foreclosure cases. That is how they are done in Florida, but in AZ my experience, once the foreclosure actions is complete the lien holder who foreclosed gets the property. I have not done a foreclosure in Maricopa county, but I haven't found a statute that mentions after the foreclosure the parcel is auctioned to highest bidder.
That is the main reason I will never buy tax liens in Florida. After the redemption period expires I don't want to go through all the trouble of trying to take ownership just to have the deed go to auction for the highest bidder, no thanks.
@Kyle W. did a great summary for Arizona. I have been investing in tax liens in AZ since 2009. One point I want to ask Kyle - are you sure the property goes to auction after the 30 day foreclosure letter? That is not what has happened in my tax lien foreclosure cases. That is how they are done in Florida, but in AZ my experience, once the foreclosure actions is complete the lien holder who foreclosed gets the property. I have not done a foreclosure in Maricopa county, but I haven't found a statute that mentions after the foreclosure the parcel is auctioned to highest bidder.
That is the main reason I will never buy tax liens in Florida. After the redemption period expires I don't want to go through all the trouble of trying to take ownership just to have the deed go to auction for the highest bidder, no thanks.
Will, as you know some states are better than others. Today I received my 1st of 3 deeds to houses from last year's auction. I also made over 4k in interest in one year from properties that were redeemed.
Time to gain entry once I confirm it's not occupied. Since I now have the deed I am the legal owner and can walk on the property and possible get into the house and change the locks.
@Jerry K. I am looking to purchase tax liens in AZ. I saw some parcel with lien open back to 2007, does this mean those liens never got redeemed? And from 2007 to 2011, the rate is 16%, and then 2012 to 2013 rate is 7%, looks like the lien holder was changed, did the first one got his/her investment back, if the property owner did not redeem, who paid him/her? And why the first holder not foreclose since she/he held more than three years? If I purchase all the back liens am I able to foreclose?
2014
1302042
Open
I
00001657
2016
0
$617.48
16%
2013
1400045
Open
I
00003835
2015
0
$591.28
7%
2012
1400045
Open
I
00003835
2014
0
$554.09
7%
2011
1302042
Open
I
00001657
2013
0
$640.87
16%
2010
1302042
Open
I
00001657
2012
0
$744.45
16%
2009
1302042
Open
I
00001657
2011
0
$769.52
16%
2008
1302042
Open
I
00001657
2010
0
$383.79
16%
2007
1302042
Open
I
00001657
2009
0
$360.24
16%
Eric, Without knowing the county it's a little difficult to have a definitive answer. Counties can have different rules for tax liens. I would say from your table that the liens have never been redeemed. The county treasurer would have the actual details. If this county treasurer has a website you can se if the lien have ever been redeemed.
That is a reasonable assumption that once the interest rate changed, it would be a new lien holder on the liens. If you pay the subsequent taxes (aka sub taxes) you get the same rate on your liens as you did on your original. Note that in other states you can sometimes get the highest rate on sub taxes if the owner has not redeemed.
Assuming the owner has not paid any of the back taxes, I would say the original lien owner did not get their investment back.
@Will Sifert was probably right when he said the property may not be worth redeeming. But also never rule out that the original lien holder may have forgotten about the liens, or, (gulp) may have passed away.
A key point to know is that if you do not foreclose on a lien within 10 years of the date of the oldest lien you hold on the parcel, then you lose your investment and any interest, and the right to foreclose. I had liens on vacant parcels in Arizona and kept paying the taxes each year because I was earning 16% interest on them. The taxes were bought in February 2011. I started foreclosure in January 2021. My attorney said it was a good hing I did because I would have lost all my liens if I waited one more month. You don't just lose your oldest lien, you lose ALL your sub liens as well. So it makes sense to foreclose earlier than the the 10 year maximum period. By the way, I did have one person pay the 10 years of taxes and interest on one of the parcels. That was a nice payday. I ended up with 3 of the actual parcels through the foreclosure. Those came through a couple of months ago. I'm in the process of selling one of the parcels right now and I;m getting a few thousand more that my original investment, accrued interest and attorney foreclosure fees. Not a big payday, but at least it's even better than the 16% rate.
You need to check with the county if you buy the back liens on when you can foreclose. If you are buying the actual original liens, than as long as they are over 3 years old form the date the oldest lien was originally sold, you should be able to foreclose. If you are buying only the latest lien, then you have to wait 3 full years before you can foreclose.
@Kyle W. did a great summary for Arizona. I have been investing in tax liens in AZ since 2009. One point I want to ask Kyle - are you sure the property goes to auction after the 30 day foreclosure letter? That is not what has happened in my tax lien foreclosure cases. That is how they are done in Florida, but in AZ my experience, once the foreclosure actions is complete the lien holder who foreclosed gets the property. I have not done a foreclosure in Maricopa county, but I haven't found a statute that mentions after the foreclosure the parcel is auctioned to highest bidder.
That is the main reason I will never buy tax liens in Florida. After the redemption period expires I don't want to go through all the trouble of trying to take ownership just to have the deed go to auction for the highest bidder, no thanks.
Will, as you know some states are better than others. Today I received my 1st of 3 deeds to houses from last year's auction. I also made over 4k in interest in one year from properties that were redeemed.
Time to gain entry once I confirm it's not occupied. Since I now have the deed I am the legal owner and can walk on the property and possible get into the house and change the locks.
I agree with you, SC sounds very good. When it comes back around I will have to fly there and try a smaller county. My concerns are that SC auctions go for so much more money than most tax lien auctions. I might only be able to buy a few liens if they are getting bid up in the tens of thousands. I would also need to make enough money from interest on what I was able to spend and win to off set my travel costs since none of the auctions are online.