how to calculate interest to reedeem

Question

I bought a tax lien certificate in 2014, in Aug 2016 I got the tax deed which i recorded it on my name. A week ago i got a letter from the an attorney saying the former owner wants to redeem and to send him the amount that he needs to pay me. i know he has to pay me what i paid plus 12% interest/annum. How do I calculate the interest?

Josh Carr · Answer

@Liliana Lopez I apologize for the correction.  I did not know it was subject to redemption.  I didn't know it was in AR you didn't mention that part.  You can find all of the rules here:

http://www.cosl.org/laws.htm

Or you can find regulations of post auction sale here:

http://www.cosl.org/

Purchasers can expect the sale process to require approximately sixty (60) days to complete, and can be broken down into three distinct periods.

Once an offer is received…

1. Ten (10) business days are reserved for offer acceptance and notice preparation

2. Thirty (30) calendar days are reserved for delivery and notification.

3. Ten (10) business days are prescribed for the redemption period following the sale date.

If the property is not redeemed by the completion of the redemption period, a Limited Warranty Deed will be issued to the purchaser.

Competitive Bidding

If two (2) or  more qualifying Offer to Purchase forms are submitted with payment for  an active parcel on the same day, the COSL will hold all offers and  payments.  The COSL will notify all qualifying purchasers by regular  mail that additional bidding will be required and, the winning bid will  be awarded to the highest bidder.  Purchasers must respond within ten (10) business days  of the submission of their initial offer with an additional offer.  The  offer must include the revised Offer to Purchase form and matching  additional funds.  Postmarks will not be accepted.  Payments and forms  must be in our office, as deadlines are strictly enforced.  The  sale date will be set thirty (30) days from the acceptance of the  highest offer, and a ten (10) business day redemption period will  follow.

Negotiated Sales

Negotiated Sales are properties sold through the Post Auction Sales process where more than two (2) years have elapsed since the initial public auction, and are open to consideration of all reasonable offers.   Offers must be submitted with a valid Offer to Purchase form and  payment in full.  Negotiated Sales are subject to review by the  Commissioner before acceptance.  If the offer is deemed ‘unreasonable’  the Commissioner may immediately reject the offer and leave the property  available to all bidders.  If considered, but not accepted, the  Commissioner may counter by mail with an acceptable bid.  In this case,  the parcel shall be set as ‘Pending Sale’ and removed from the list.  If  the purchaser agrees to the counter-offer, he/she must sign and submit  the Commissioner’s counter-offer with payment to the COSL within the ten  (10) business days of the Commissioner’s counter-offer.  Submission’s  received after this date will not be accepted, and the parcel shall once  again be made available on our list.  Like all Post Auction Sales,  Negotiated Sales will have a scheduled sale date thirty (30) days from  the date of acceptance by the Commissioner and a subsequent ten (10)  business day redemption period.

Payment

Acceptable  payment methods include: personal check, certified funds (such as a  cashier’s check or money order), or if paying in person: cash or credit  card. Payments must be accompanied by a valid Offer to Purchase form,  and match the total amount due listed on the form.  Payments made with  insufficient funds will cancel the sale, and the purchaser may no longer  be allowed to purchase properties from the COSL.

Refunds

If a property  is redeemed or if a sale is overturned or cancelled, payments submitted  by purchasers will be refunded in full by check, made payable to and  mailed to the entity from whom the payment was received.  Please allow  thirty (30) days for your refund to be processed.

Litigation

By statute, sales by the COSL are subject to a ninety (90) day litigation period  from the date the Limited Warranty Deed was issued.  Depending on  circumstances, there may be no time limitation on the former owner or  interested party’s right to challenge the sale in court.  It is  recommended that purchasers make no major changes or improvements to  properties before the expiration of the litigation period.  Furthermore,  it is advisable that purchasers seek legal consultation to establish  stronger title to properties purchased through tax sale.  Once again, the COSL cannot guarantee title.

Josh Carr · Answer

@Liliana Lopez  Hi Liliana, congrats on your new tax deed.  If you now own the deed it is a different marketable product.  You can charge now the price that you want for your deed and if the deed is in your name you will need to do a transfer of the deed once your price has been satisfied.  If it was still a tax lien then the interest would apply.  You could incorporate the "nice-guy" strategy and just sell it back to him.  It seems like a lot of hassle to do that much work and not make anything though.   Let us know how it turns out.

Dennis Weber · Answer

@Liliana Lopez  I would calculate per diem.  12%/365 equals .03287. Then multiply your bid amount by .03287   And then multiply the amount of days befor redemption. Then add your other allowable fees and costs.

Josh Carr · Answer

@Liliana Lopez I'm not a tax attorney but I don't think you can get more than the county would on your redemption unless, because it sounds like if it is up to you, it could be past the redemption period and the property owner would like to reach out to you to see what you will accept so they don't lose their property.  Either way, 12% per annum turns out to be 1% per month so you calculate it by how long you have held it plus, fees and penalties if any.

Josh Carr · Answer

All the rules and regulations for AL, pardon the correction again, are right here:

http://revenue.alabama.gov/

Here is the answer that MAY pertain to you:

DO I HAVE THE OPTION TO REDEEM MY TAX DELINQUENT PROPERTY?

Yes. You may redeem your property   within 3 years of sale  by paying all  taxes, interest, fees, and penalties at the   rate of 12%  per annum.

Liliana Lopez · Answer

@Josh Carr Is not in AR is in AL. The property was sold to the State in May of 2013, I bought the Tax Lien Certificate in 2014 and in May 2016 i got the notification that I qualify for a Tax Deed since the redemption period ended. I recorded the Tax Deed on my name in Sep 2016. Last week I got the letter from the attorney saying the former owner wants to redeem, I understand he still has the right to redeem but it has to be done through me now. I would like to know what would be the right way to calculate what he needs to pay me to sign the deed back over to him. Is there a formula to do that? do I need to hire an attorney?

Jeff B. · Answer

OH REALLY?  In most States a buyer of a Tax Deed subject to Redemption is allowed to charge

• what you actually paid for it plus costs
• and an interest fee for the duration you have held the deed.
• NOT any FMV or ARV

The investor's profit is THE INTEREST in this case.

Be sure to verify the regulations for your State.

how to calculate interest to reedeem

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