Tax Lien Information
Member since 2023 · 2 posts · 1 vote
Tax Lien Information
Most Popular Reply
Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes
3yQuote from @Teri Feeney Styers:
@Franklyn Douglas III I have invested in tax liens in the past. Here is what is good: in Colorado they pay 9 points above the current US Federal Discount Rate (which is 5.5% right now) - so that would be an interest rate of 14%+. Here is what is bad: in most cases, when people realize their property has been sold in a tax lien sale they redeem (pay their property taxes) - so you may only earn that rate for a matter of a few months. Here is what is good: the county handles all the necessary paperwork and sends you a check. They also give you the option to buy the lien for subsequent years so that you stay in first priority (the whole process takes 3 years before the property is forfieted). Here is what is bad: only about 1% of properties actually end up in the hands of the lienholder. 99% redeem the property at some point.
You forgot the really really bad, Colorado is a premium bidding state and almost all tax sales will sell with a premium. The premium is not refunded and you don't make any interest on it. It's the cost to win the lien. So if the lien amount is $1000 and you bid and win it at $1,100. You paid a $100 premium. You make 14% on 1K or 1.17% a month or $11.70 / month. Say it redeems in 9 months, you make........... $5.30 profit. $100 premium - $105.30 in interest. You do the math if it redeems in 1 month :( You will LOSE money on lots of tax lien sales with premium bidding. The people selling classes will just say "make 14% interest" but leave out the important details....
18 Replies
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes3y
@Franklyn Douglas III I’ve never done Colorado tax sales but presuming they are like most areas they are not nearly as easy, profitable or risk free as the promoters would have you believe.
You will learn a lot just by participating even if in a small way.
- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Ned Carey
I saw a post in fb where someone says they wil pay 24% to investors i. Their fund on tax liens
I was scratching my head on that one…
7e investments53 Reviews - Real Estate Agent · Grand Junction, CO · Member since 2015 · 1k+ posts · 736 votes3y
@Franklyn Douglas III I have invested in tax liens in the past. Here is what is good: in Colorado they pay 9 points above the current US Federal Discount Rate (which is 5.5% right now) - so that would be an interest rate of 14%+. Here is what is bad: in most cases, when people realize their property has been sold in a tax lien sale they redeem (pay their property taxes) - so you may only earn that rate for a matter of a few months. Here is what is good: the county handles all the necessary paperwork and sends you a check. They also give you the option to buy the lien for subsequent years so that you stay in first priority (the whole process takes 3 years before the property is forfieted). Here is what is bad: only about 1% of properties actually end up in the hands of the lienholder. 99% redeem the property at some point.
- Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes3y
Quote from @Teri Feeney Styers:
@Franklyn Douglas III I have invested in tax liens in the past. Here is what is good: in Colorado they pay 9 points above the current US Federal Discount Rate (which is 5.5% right now) - so that would be an interest rate of 14%+. Here is what is bad: in most cases, when people realize their property has been sold in a tax lien sale they redeem (pay their property taxes) - so you may only earn that rate for a matter of a few months. Here is what is good: the county handles all the necessary paperwork and sends you a check. They also give you the option to buy the lien for subsequent years so that you stay in first priority (the whole process takes 3 years before the property is forfieted). Here is what is bad: only about 1% of properties actually end up in the hands of the lienholder. 99% redeem the property at some point.
You forgot the really really bad, Colorado is a premium bidding state and almost all tax sales will sell with a premium. The premium is not refunded and you don't make any interest on it. It's the cost to win the lien. So if the lien amount is $1000 and you bid and win it at $1,100. You paid a $100 premium. You make 14% on 1K or 1.17% a month or $11.70 / month. Say it redeems in 9 months, you make........... $5.30 profit. $100 premium - $105.30 in interest. You do the math if it redeems in 1 month :( You will LOSE money on lots of tax lien sales with premium bidding. The people selling classes will just say "make 14% interest" but leave out the important details....
- Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes3y
Colorado is 15% this year (they round up)
TAKE NOTICE !! at least one county, Costilla stopped (suspended) issuing treasurer deeds because of the supreme court ruling in MN. In an opinion piece, the CO Attorney Gen finds tax sales, specifically issuing deeds unconstitutional based on that ruling. I don't know yet if all counties are following suit. Of course they have no issue with selling the liens and collecting money from investors, they also have no issues with charging a premium that is non refundable and the county keeping the money. They just have issue with us having a way to protect our investment by getting the deed if the property owner chooses to not redeem. Wow, that's crazy, Will... I just read the CO Attorney General's opinion piece and details of the Tyler v. Hennepin case. The AG basically says that the tax lien sales themselves are fine and dandy, but the issuance of deeds will likely be contested going forward. I think it's very likely that more counties will stop issuing treasurer deeds as a result. Not just in Colorado, but likely across the country. I can't believe this isn't being talked about more widely. All the tax lien gurus out there certainly seem to be keeping their lips shut about this...
Considering there is a 3-year redemption period on Colorado liens, investors this year wouldn't have a chance of getting a deed for 3 years. Even if some counties are still issuing deeds today, what's the chance that tax deed issuance will be stopped in 3 years, given this recent case? Pretty high. Plus, average premiums in Colorado tax sales last year were around 7%. That means you're only making a ~7% return annually when you deduct the premium from the 15% interest rate. But, you only get that IF the homeowner doesn't redeem/pay their tax within a year (which most do), otherwise, your return will be even lower. Premiums MUST come down this year. Otherwise, investors are looking at paltry returns for a time-intensive investment, and no chance of ever actually acquiring property through the liens. The scary thing is that I've been researching tax liens for months yet didn't come across anything about this case until today, so I expect that a lot of other investors are in the dark. Anything else I'm missing here?- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes3y
@Will Sifert
Exactly gurus leave out those important facts so they can still charge you thousands to “learn” this
7e investments53 Reviews - Real Estate Broker · Coppell, TX · Member since 2011 · 5k+ posts · 4k+ votes3y
Quote from @Elaine E.:
Wow, that's crazy, Will... I just read the CO Attorney General's opinion piece and details of
Who knows how this will end up, but the real issue is not the taking the of property, but taking of the value I think. There has to be an efficient means of recycling this property, just as we do with plenty of other similar circumstances. Don't pay your income taxes, your house or other assets can be seized. Do pay your alcohol beverage taxes if you own a bar, they're going to come after you and seize your bar and probably even non-bar personal assets. If you're a criminal, you may have to pay restitution. Don't pay your mortgage, lender will likely take your house.
So I expect while there is a lot of talk about tax sales, in the end they have to continue. The real issue is what is done with any overages. I think this is also not as big of an issue as people think it is, but it does exist. In my jurisdiction I believe the rule is that the previous owner has 30 days to request the overage. The problem is if they didn't know about the sale, they probably don't know about the overage. So of course if it was a big overage, they're upset when they find out about it, and find they can't get it. Easiest solution might be just to extend the period of being able to collect that overage before it gets escheated to the state or taxing authority. Give them 3-5-10 years to claim it.
In my area for the most part I think it is a needed system and a fairly efficient system, which is probably a miracle for the way a lot of government works or doesn't work. Very rare grandma is getting kicked out of her pristine house when she is down on her luck and loosing all her equity. The rare instance creates some sensational headlines, investigations, and indigestion, but in the end probably 99% are justified and necessary.
They will continue I expect.
- Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes2y
Quote from @Bruce Lynn:
Quote from @Elaine E.:
Wow, that's crazy, Will... I just read the CO Attorney General's opinion piece and details of
Who knows how this will end up, but the real issue is not the taking the of property, but taking of the value I think. There has to be an efficient means of recycling this property, just as we do with plenty of other similar circumstances. Don't pay your income taxes, your house or other assets can be seized. Do pay your alcohol beverage taxes if you own a bar, they're going to come after you and seize your bar and probably even non-bar personal assets. If you're a criminal, you may have to pay restitution. Don't pay your mortgage, lender will likely take your house.
So I expect while there is a lot of talk about tax sales, in the end they have to continue. The real issue is what is done with any overages. I think this is also not as big of an issue as people think it is, but it does exist. In my jurisdiction I believe the rule is that the previous owner has 30 days to request the overage. The problem is if they didn't know about the sale, they probably don't know about the overage. So of course if it was a big overage, they're upset when they find out about it, and find they can't get it. Easiest solution might be just to extend the period of being able to collect that overage before it gets escheated to the state or taxing authority. Give them 3-5-10 years to claim it.
In my area for the most part I think it is a needed system and a fairly efficient system, which is probably a miracle for the way a lot of government works or doesn't work. Very rare grandma is getting kicked out of her pristine house when she is down on her luck and loosing all her equity. The rare instance creates some sensational headlines, investigations, and indigestion, but in the end probably 99% are justified and necessary.
They will continue I expect.
Exactly, selling a tax lien is not a legal issue and selling the property is not an issue. It's that they think it shouldn't be sold for more than the amount owed in taxes. In a tax lien state there is no "overage". The investor buys the tax lien, pays the taxes and any on going expenses, then when the redemption period expires he pays for the deed and it's theirs. If the property is worth 20K and the owner only owed 5K, there lies the problem (according to CO and others....)
What Colorado and other states have no problem doing is making money off the investors. SEVERAL tax sale properties will be sold at a premium that is 100's of dollars over the cost of the taxes due. The county keeps 100% of this money 100% of the time. Of course they have no problem taking our (investor) money, but now they have a problem with us making money. How many tax liens do we lose money on because we bid THEIR premium and it was redeemed right away so we lost a lot! So we finally get a deed and stand to make a profit from it, but no.... that's not right? In what planet do they think this system would work? So we pay premiums, lose money on most redemptions, finally get one that can go to deed and can't get the deed because the property is worth more than the taxes owed? WTF ? Exactly, @Will Sifert! In the long term over several years, interest rates and returns on tax liens should go up, as investors will only be able to value the interest rate as the return on their investment, with no potential for a property windfall. However it will take time for this information to spread to everyone… I hope the counties don’t fleece newbie investors too badly this year.
PSA - Colorado Tax Lien investors, take note of this email from Mesa County. I expect other counties will follow suit.
"We wanted to reach out to our active tax lien investors in Mesa County. There is a new law that is slated to be enacted on July 1, 2024 which will adjust the process to obtain a tax deed. The biggest change will be that tax deeds will not automatically be issued to the tax lien holder through the tax deed application process. A tax deed will be issued to the highest bidder at the public auction-which will take place approximately 4 months after the application for tax deed. (Our auctions will continue to be held online.) This 2nd auction provides an opportunity for the property to be sold for "market value" so that the owner does not lose their property for less than the market value. The opening bid will be the combined cost of the lien with the included Treasurer's fees and costs. Some have asked about whether they would get their premium returned, premium is not included in the opening bid. (This update will not apply if you have a tax deed application in process and it is deeded prior to July 1, 2024.)
Manufactured Homes are not currently included in this process. However, the legislature is working on a legal process that would address the certificate of ownership process for obtaining title for a manufactured home. We anticipate that there will be a moratorium on all Certificates of Ownership for manufactured homes until new legislation is passed/enacted. If we receive any applications for Certificate of Ownership, prior to the moratorium taking effect, the application fee has increased to $750.00.
Additionally, we have increased our tax deed application fee. This will reduce the need for our office to send out Statements of Expense. Tax Deed application fees for Real Estate (R accounts) will be $1500.00.
Please feel free to reach out with any questions. We will do our best to assist you with how we will implement this legislation in Mesa County.
Jackie Campbell Mesa County Treasurer and Public Trustee's Office"- Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes2y
Quote from @Elaine E.:
PSA - Colorado Tax Lien investors, take note of this email from Mesa County. I expect other counties will follow suit.
"We wanted to reach out to our active tax lien investors in Mesa County. There is a new law that is slated to be enacted on July 1, 2024 which will adjust the process to obtain a tax deed. The biggest change will be that tax deeds will not automatically be issued to the tax lien holder through the tax deed application process. A tax deed will be issued to the highest bidder at the public auction-which will take place approximately 4 months after the application for tax deed. (Our auctions will continue to be held online.) This 2nd auction provides an opportunity for the property to be sold for "market value" so that the owner does not lose their property for less than the market value. The opening bid will be the combined cost of the lien with the included Treasurer's fees and costs. Some have asked about whether they would get their premium returned, premium is not included in the opening bid. (This update will not apply if you have a tax deed application in process and it is deeded prior to July 1, 2024.)
Manufactured Homes are not currently included in this process. However, the legislature is working on a legal process that would address the certificate of ownership process for obtaining title for a manufactured home. We anticipate that there will be a moratorium on all Certificates of Ownership for manufactured homes until new legislation is passed/enacted. If we receive any applications for Certificate of Ownership, prior to the moratorium taking effect, the application fee has increased to $750.00.
Additionally, we have increased our tax deed application fee. This will reduce the need for our office to send out Statements of Expense. Tax Deed application fees for Real Estate (R accounts) will be $1500.00.
Please feel free to reach out with any questions. We will do our best to assist you with how we will implement this legislation in Mesa County.
Jackie Campbell Mesa County Treasurer and Public Trustee's Office"
Wow, Colorado say good bye to 90%+ of the money you have been taking from investors for premium bidding. So they want us to make non refundable premium bids to win a lien that makes 9%+ interest. Many of which liens get redeemed in a couple months time and we lose money on all of those. The few that don't get redeemed, instead of getting the deed now you have to bid against other investors like a deed sale. This is worst than Florida. Many people in CO were bidding 20,30,50,100% even as much as 700-800% on some cheap land liens just to win it because they felt like it would not redeem and they would get the property. All of that money wasted, you will not get the property or your premium bidding back. Personally, I will never bid again in CO, this system sucks terribly for investors. Pay a non refundable premium to win a lien that you have to bid against the public to get the deed LMAO... no thanks! Same, this update is shortsighted and stabbing investors in the back. They should have grandfathered in liens sold before this change. My condolences to everyone who has paid the high premiums over the last couple of years who now have no way of making that money back.
- Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes2y
Quote from @Elaine E.:
Same, this update is shortsighted and stabbing investors in the back. They should have grandfathered in liens sold before this change. My condolences to everyone who has paid the high premiums over the last couple of years who now have no way of making that money back.
Me being one of them and I will no longer purchase tax liens in CO, I suspect many others will follow suit. In 2022 alone I spent about 65K in tax liens in CO with about 15K of that being premiums. I have lost a lot on redemptions so far but still had a decent amount of active liens that will be coming up on 3 years. I am sure I would have ended up with a few of them, sold them and net a profit. Now, I have to initiate an auction and then bid against other people just to be able to keep those properties. Not going to happen, if no one bids fine I will get to keep it, but chances are they all going to get bid up. There are so many "investors" out there at auctions paying near market value it's crazy. There is no room left for profit and I am already in the hole. I have already spent a lot of money and eaten into profits paying the premiums, I am not going to spend more money bidding on this properties.
- 2yJohn UnderwoodPro MemberInvestor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
@Will Sifert
There are really good states and not so good states to do this.
Everyone needs to do their research. The state you live in may not be a good place for this.
You can always travel to states that do have good laws surrounding investor purchased tax liens.
To me, anything over a 12 month redemption period is not good
@John Underwood The case that set precedence for this tax lien change was not in Colorado - my concern is that other states will also follow suit, and they may, like Colorado, do so without reasonable notice or consideration to premiums paid or impact on investors who invested before the change. That said, other states don't require premiums so investors' risk may vary.
- Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes2y
Quote from @John Underwood:
@Will Sifert
There are really good states and not so good states to do this.
Everyone needs to do their research. The state you live in may not be a good place for this.
You can always travel to states that do have good laws surrounding investor purchased tax liens.
To me, anything over a 12 month redemption period is not good
I am fine with 3 year redemption periods for tax liens. SC is essentially a one year redeemable deed state. Colorado wasn't a bad state until they decided to change the entire process right in the middle of the game. Now it's a terrible state if you are looking to acquire property. - Investor · Covington, LA · Member since 2012 · 517 posts · 317 votes2y
Quote from @Elaine E.:
@John Underwood The case that set precedence for this tax lien change was not in Colorado - my concern is that other states will also follow suit, and they may, like Colorado, do so without reasonable notice or consideration to premiums paid or impact on investors who invested before the change. That said, other states don't require premiums so investors' risk may vary.
Colorado seems to be an outlier, look what they did with trying to take Trump off the ballot. I don't know what is up with that state but they seem like they want to make drastic changes to law. I am not aware of any other states that have made changes because of that happened in MN. Which MN is a deed sale state, totally different from liens. No lien sale state should be making changes because of the MN case, but Colorado decided to anyway.
Some states do have premium bidding, Mississippi is one just off the top of my head.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.