All Forum Posts by: Jerry K.

@Roy Oliphant and @Tom Yung thanks. What I do is not for everyone, but I get questions via BP all the time from new investors so I try to share some real cases to give a sample of what it really is like to invest in liens/certificates.

@John Underwood I've been following your posts and SC seems like a friendly place for lien investing. I actually live in IL and after seeing how the auctions were run in the old days here where the best parcels ended up being awarded to only a few investors in the crowd, I stopped investing here in the early 90's. I found the online auctions in AZ about 8 years ago and since I get to AZ about every 12-18 months, I know the areas I invest in.

As you know, one of the keys to successful investing is knowing the statutes in your area. AZ has a long redemption period at 3 years, but that I'm not after the property, so it plays to my advantage of getting high interest. Owners take longer to pay back when you have a longer redemption.

This part of my investments is targeted for passive income with little oversight. Tax certificates in AZ can get higher rates for longer periods. I'm not a person who wants to be a landlord or flip properties. But I do have to be prepared in case I end up with a property through foreclosure.

There are a few other strategies in real estate that result in income producing properties that have no tenants and I look at other states to find those. SC has been on my radar based on your posts - so keep 'em coming!

Too long for a forum post, I wrote a case study of a tax lien certificate deal I just completed on two lower value, vacant residential parcels in Arizona. It gives a newer tax lien investor an idea of decisions you need to make after you buy a tax lien in northern Arizona. I had a neighbor of the parcels want to buy my liens or the land - if I started foreclosure. I had to decide which route was better - sell them the lien or foreclose and sell them the land. It also shows how much interest you can earn on a small amount when you accrue 16% interest annually.

Read the story on my Biggerpockets blog here.

@Ben F. I actually didn't buy any in Will County. The county just happens to offer a file every month of all the certificates that redeemed in that month. It gives the amount, the investor and the certificate number. The first two digits of the certificate number indicate the year the certificate was sold.

Will County usually has the annual tax lien sale in November each year. I have the data on each month of redemptions, (I had combined all months into one spreadsheet for the whole year of 2014) but tax certificates can go a couple of years before being paid off. As you can see from my 2014 statistics above there was a 2009 certificate that redeemed sometime in 2014. 

My one group of stats for 2014 is too small to draw general conclusions on how long it takes for certificates to redeem, but for that year it shows that certificates sold in 2012 had the most redemptions in 2014. Those obviously went over 12 months before being redeemed by the owner.

I invest in liens mainly in Arizona and there is very little rhyme or reason as to which liens will pay off first. I've been investing on an off in liens/certificates since the late 1980's, and have been consistently buying AZ liens since 2010. I'm not a big investor, but I would say parcels with homes pay off quickest. And usually the better the home, the faster it's paid back. 

That said, I'm sitting on liens for a nearly million dollar home, that come February 2018, will hit the 3 year redemption period and I could begin foreclosure. The owners live in the home, they bought through a trust deed - not a mortgage - so the private party that lent them the money probably is not aware the owners are not paying the taxes. Of course I expect the liens to be paid off once I start the foreclosure, but it goes to show you never know which liens will be redeemed quickly by owners.

I had one parcel of vacant residential land that I purchased the certificate in the February auction this year and it paid off in March. I also bought several liens on other homes and vacant land in those auctions and none of the others have redeemed yet this year (6 months later).

For my investment savvy friends I describe tax liens in Arizona as "Fixed interest, variable maturity, zero coupon instruments". The rate earned is fixed, the maturity date is whenever (if ever) the owner pays the taxes and interest back and 'zero coupon' because you don't actually get paid any interest until the owner redeems.

@Ben F. I have tax lien redemption results from Will County in IL for 2014. I don't have it broken down by month, but I can give a break down of how many certificates paid off from past years and an average amount of the certificate by year.

This is for certificates paid off only in 2014:

2009 had 1 certificate paid off in the amount of $56,033.57

2010 had 565 certificates that were paid off with an average amount of $8,874.40

2011 had 644 certificates paid off with an average amount of $5,708.10

2012 had 2416 certificates paid off with an average amount of $5,705.36

2013 had 241 certificates paid off with an average amount of $4,242.69

Each county will be different since real estate values will vary by location and total tax amounts.

I saw a short section of a street as a parcel in a northern Arizona tax lien auction this year. Funny thing was, I knew the street since I had just researched where a member of the band Chicago had a home in the city. Then this lien shows up and the parcel outline was the street in front of about 4 homes including the Chicago band member. Not a gated community nor private subdivision. Just what looked like part of a public street. Didn't have the heart to buy the lien. Also weird was that the parcel owner was an individual's name and not the city.

I did, however, buy a lien on a parking lot for some nice professional offices. The buildings are rented. Interest rate on the tax lien was pretty good and the owner of record will pay the lien off before it ever gets to the foreclosure option. That's all I want for this allocation of money  - a good interest rate return.

@Kevin S. - I'm not an attorney or a title expert. You have two separate items to address;

1) Time-frame for Treasurer's deed to be challenged in court.

2) Time-frame for Title insurance after a tax lien foreclosure/Treasurer deed conveyance.

 In regards to the first point - here is the Arizona statute (section "B" is the most pertinent):

42-18204.  Judgment foreclosing right to redeem; effect

A. In an action to foreclose the right to redeem, if the court finds that the sale is valid and that the tax lien has not been redeemed, the court shall enter judgment:

1. Foreclosing the right of the defendant to redeem.

2. Directing the county treasurer to expeditiously execute and deliver to the party in whose favor judgment is entered, including the state, a deed conveying the property described in the certificate of purchase.

B. After entering judgment the parties whose rights to redeem the tax lien are thereby foreclosed have no further legal or equitable right, title or interest in the property subject to the right of appeal and stay of execution as in other civil actions.

C. The foreclosure of the right to redeem does not extinguish any easement on or appurtenant to the property.

D. The foreclosure of the right to redeem does not extinguish any lien for an assessment levied pursuant to title 48, chapter 4, 6, 14 or 18, or section 9-276

I recently read a case where a company foreclosed on an AZ property and received the deed through tax lien foreclosure. However, a few months later the original owners appealed saying they were not properly notified of the original Intent to foreclose since the lien holder (their lawyers) had only sent the notices to an address that the previous owner had sold 5 years earlier. When the actual foreclosure case was started the original owners did receive the actual foreclosure documents sent to a new address - but never the original Intent to foreclose. The appeal was successful and the foreclosure judgment was rendered void - returning the property to the original owners.

So I don't know of an actual time period that an appeal can take place on a tax lien foreclosure in Arizona. I could not find it in the statutes. Any AZ tax foreclosure lawyers in the BP house?

Basically the same type of answer for the second part of the question. I think it may be up to the individual title company on when they want to issue title insurance on a Treasurer's deed in AZ. 

I realize I've given no solid answer here - so I hope someone else can provide more of an answer.

@Bret W. The first question is best answered by an AZ tax lien attorney. I never started a foreclosure so close to the lien expiring.

I'll PM you the name of the attorney I've used in Phoenix for AZ tax lien foreclosures.

@Bret W. There could be a number of reasons the property was sold to Buyer "2" then re-sold back to Buyer "1". Maybe "2" bought the property on contract from "1" and sold it back when they decided not to complete the payments. Could be "1" bought the property in self-directed retirement account and realized they couldn't use the parcel for themselves while held in the account. So they sold to "2" for a period of time, then bought it back using money outside of the retirement account. That is a "questionable" way to get around the "self-dealing" laws of buying investments from your retirement accounts before retiring. I'm sure there are many more reasons the property was sold back to the original buyer.

If you create a free account on the www.BidMaricopa.com website, then you can view past auctions. The bidder numbers should remain the same for a person/entity year-to-year. Click on the "Results" menu and then click on the drop down list where it says "Winning Bidder". that list will have the bidder number and the entity or person's name next to the number. Then you have to do some internet research to find the person's contact information. Not always easy and maybe others in the forum know a way to get the contact information. I have been contacted via snail mail by other AZ lien investors in the past who want to unload some of their liens. Somehow they found me in Illinois.

Lots of reasons why someone has not foreclosed. As @Ned Carey said many people want the interest rate return and not the actual parcel. Others just plain forget they own the lien. Or like you said, the property is worth less than the liens.

I'll help where I can and let you know if I don't know the answer.