Louisiana Tax Lien Sale Auction question
Hammond, LA · Member since 2016 · 9 posts · 1 vote
Hi, I am trying to learn about tax lien sales in Louisiana.
As I understand, the bidder with the lowest % of willing to own wins the auction.
As I understand it, if you win, you pay the price, say $500. Then, they would pay you back the $500 + 5% penalty + 1% interest per month. However, if you win, you must pay the property taxes going forward until it is repaid.
Does the owner repay you any of the additional property taxes you paid in excess of the original amount, $500?
Any help is much appreciated.
@Joseph Pumilia Property tax sales can be a very good investment, but it's also complicated and you can just as easily lose money as well. I've purchased 100's of properties from tax sales in Louisiana over the last 10+ years. While I have good grasp on the process and all the pros and cons, I've had to learn some the hard way. There is a steep learning curve and I still learn new things from time to time.
This is a very brief summary of how it works, to answer your questions...
Someone is delinquent on their property taxes, it will go to a property tax sale usually in May - July. The amount they owe on property taxes plus interest and penalties is what you would pay if you get the property. The "%" bidding down will always happen online (Civic source) but in some " in person" property tax sales % bidding doesn't take place. (that is whole nother conversation).
When you win, the person has 3 years to redeem the property, during that time they pay you 1% a month interest plus the initial 5%. Yes, that is on the entire amount you paid at tax sale and on all of the additional tax bills that you paid.
No, you are not required to pay the property taxes going forward. If you do not pay the next property tax bill then the property will go back to the tax sale the next year. You then have 3 years to redeem it. You would need to redeem it and quiet title before 3 years or you would lose it to the person who bought it at tax sale from. (This is another whole long conversation, but it is also a strategy that some tax sale buyers use.) To be safe, I would plan on paying the tax bills not to mention making 1% a month (12% a year) on the money pay is a good investment in and of it's self.
I am in Covington and also a licensed real estate agent, if you have any other questions let me know.
@Joseph Pumilia I believe they are supposed to pay you back all expenses with interest. Call Civic Source to make sure though (833)692-4842
@Joseph Pumilia Property tax sales can be a very good investment, but it's also complicated and you can just as easily lose money as well. I've purchased 100's of properties from tax sales in Louisiana over the last 10+ years. While I have good grasp on the process and all the pros and cons, I've had to learn some the hard way. There is a steep learning curve and I still learn new things from time to time.
This is a very brief summary of how it works, to answer your questions...
Someone is delinquent on their property taxes, it will go to a property tax sale usually in May - July. The amount they owe on property taxes plus interest and penalties is what you would pay if you get the property. The "%" bidding down will always happen online (Civic source) but in some " in person" property tax sales % bidding doesn't take place. (that is whole nother conversation).
When you win, the person has 3 years to redeem the property, during that time they pay you 1% a month interest plus the initial 5%. Yes, that is on the entire amount you paid at tax sale and on all of the additional tax bills that you paid.
No, you are not required to pay the property taxes going forward. If you do not pay the next property tax bill then the property will go back to the tax sale the next year. You then have 3 years to redeem it. You would need to redeem it and quiet title before 3 years or you would lose it to the person who bought it at tax sale from. (This is another whole long conversation, but it is also a strategy that some tax sale buyers use.) To be safe, I would plan on paying the tax bills not to mention making 1% a month (12% a year) on the money pay is a good investment in and of it's self.
I am in Covington and also a licensed real estate agent, if you have any other questions let me know.
@Will Sifert, do you mind expanding on the last strategy that you mentioned. Why would a tax sale purchaser want the property to go back into the tax sale process?
@Will Sifert, do you mind expanding on the last strategy that you mentioned. Why would a tax sale purchaser want the property to go back into the tax sale process?
That strategy is basically to spread your money out more so you have the chance at acquiring more properties. For example, you have a limited amount of money that you can spend each year on tax sales, let's say you spend most of it ($5,000) at the tax sale in June which gets you 5 properties. Six months later and none of those properties have redeemed and you receive the property tax bills for them which costs you about another $5,000. If this is tapping out your budget, if nothing is redeemed by the next summer / tax sale, then you will have no money to purchase more properties. If you don't pay those property tax bills then you have that 5K to spend to get 5 more properties.
You don't have to pay the property tax bill. if you don't, the property will go back to tax sale the next year. But, that doesn't mean that you lose your opportunity to acquire the property. If the property makes it 3 years from the date you got it at tax sale without the owner redeeming it, you will have 1 year to redeem the property before you lose your right to do so to the person who bought it at tax sale the year after you. This strategy allows you to leverage more, but it is costly. If a property hasn't been redeemed after 3 years then you now need to redeem it from the person who bought it after you and you have to pay back those property taxes plus all the interest and penalties. After you redeem it and get rid of the tax sale buyer who came after you, you then can sue to quiet title against the original owner.
Keep in mind, when using this strategy.... If you don't redeem it with in 3 years from the date that it went back to tax sale and was purchased by another tax sale buyer, than you lose your right to redeem it. When the next tax sale buyer purchased it, he has to wait 3 years before he can redeem it. Once it goes 3 years he could sue to quiet title against you and the original owner.
I suspect a lot of people bidding on civic source don't understand the 1%. If you feel confident the property will be redeemed and you looking to make 17% interest on your money in the first year, then you don't care if you bid 1%. Yes who ever bids the lowest first wins, so basically it's a race down to 1%. Although some companies will be 1% right away. There can be no multiple 1% bids. First one gets it.
No matter what you bid % you still make the same amount of interest on your money, which Louisiana has one of the best rates of return.
The people who bid 1%, hope to own the property and that it will not be redeemed have no clue what they are doing. The % you bid is the % of ownership you would have if it goes 3 years without being redeemed and then sue to quiet the title. The risk is, if it doesn't get redeemed and you bid 1% you will be spending more money in legal fees than what 1% of the property is worth.
I am a bidder that is focused more on trying to acquire the property not so much worried about an interest rate of return. The online auctions make it a lot harder to get 100% than the in person auctions. (I personally dislike the online auctions for that reason and for opening this up to a lot of people who have no clue what they are doing. They get screwed and never come back but there is always new ones to take their place.) You also have to target properties that the big hedge funds wont want, a lot of vacant land etc. It makes you adjust your strategy a lot.