All Forum Posts by: Jerry K.

@Patrick Walters - I wouldn't bother with the home and $46.50 tax lien. Even if I won with 16% interest it accrues 62 cents in interest per month. That's a whopping $7.44 cents for the year.  I just looked at the auction and I see there are 3 bids on the lien:

With 3 bids I would guess the interest rate is actually going to be lower than 16% when the auction ends on the 15th. So even less than 62 cents per month in interest.

The vacant lot has no bids, so getting 16% is a pretty good bet. BUT take a look at what the county says is full market value -- $800.00. Zillow shows the same price - based only on the county value because there are no recent sales in the area. Also, the owner bought the lot in 1997 for $300.00:

It's a couple thousand dollars to foreclose in AZ, so that would be a losing proposition. I see from the auction record that there have been liens on the this property in the past. Here is the payment record:

So the owner usually pays after several years. You would need to pay the subsequent years taxes of $20+ and you will earn the interest rate on those as well - but the risk is the owner never pays. It would cost you much more than the property is worth to foreclose. The reward is small compared to the risk.

@Robert Goldman When you were in grade school did you ever trade a part of your lunch that you really didn't care for because someone offered you something you liked a lot better? Like you had a small bag of peanuts and the other kid had a candy bar you loved. You couldn't believe the other kid offered his candy bar for the peanuts. He had to make you the offer because you didn't think he would ever consider that a fair trade. But what you didn't know was that he hated that type of candy bar you loved and he loved peanuts.

You have stopped a potential great deal because "you think" they won't accept your offer. But you don't know that. They may want out of the tax debt and the burden of owning the property. Your offer of paying the taxes and a little bit more - whatever that amount is - could be the answer they would accept. 

Many people don't want to list with a broker to sell because they don't want the hassle. A broker will tell them they have to clean up and repair the place. They'll use words they don't understand like "listing fee, contingencies, subject to inspection," etc.

You walk in and say, I want to help your situation. Tell me what scares you about your position. Then listen. You may find they just want the tax burden off and they want out with no other money out of their pocket. If you offer the amount of the taxes and anything extra to help them move - you could be the answer that gets this burden off their shoulders.

To paraphrase the Gretzky family - You miss 100% of the shots you don't take.

@Patrick Walters - $50 makes sense for a vacant lot in a small, sparsely populated area in Arizona. It also could be a situation where the owner didn't pay all of their taxes for the year.

I found two examples right off the bat in the Navajo county auction. I did a search of all liens that were $50 or less in the auction website. The first one was for $46.50:  (click on image to make it larger)

I clicked on the Map link it brought up a nice house with Google street view:

Definitely more than $46.50 in taxes should be owed. So I went back to the auction listing and clicked on the Parcel ID link and it brought up the Assessment record for the home showing the market value of $180,000+

At the top of this Assessment screen is listed the word/link "Taxes" and I clicked on that and it brought up the taxes paid history. I noticed it is all paid up from previous years (2016 and earlier) and the auction this year is for 2017 taxes. I see the Taxes amount was $1,471.42 and there is a Balance of $16.50. 

The $49.62 is made up of the $16.50 plus interest, plus fees to prepare and list in the auction. Clicking on the "Payments" amount of $1,588.43 brings up a record showing the owner made all payments in July - which was late from the first payment date on 5/1/2018, and thus they started accruing interest on the 1st half amount at 1.333% per month. They probably think they are paid in full, but the county still has the $16.50 amount that now has interest and fees due. 

Conclusion - they did not pay the full amount and don't know it. My guess, they will pay in full once they are aware. I also see there is one bid on the lien in the auction.  

Back to the auction listing - a few rows down (ADV 0012) from the top is a lien in the amount of $49.82. Clicking on the Map shows it is a vacant lot:

Clicking on the Parcel ID brings up the Assessment and it confirms it is classified as Vacant with a Market value of $1,378.00.

Clicking on the "Taxes" label at the top of the Assessment record it shows the payment history. The annual taxes on the lot were $12.22. They haven't been paid so interest is accruing plus fees for the auction - making the lien amount $49.82.

Looks like the owner has had to pay interest in most of the previous years on the payment history above, so he will pay at some point soon. At least the lien is on a full size lot. Many times a low amount is because it's a little sliver of land that you can't do anything with.

Hope those examples help show how such a low amount could be in the lien auction. 

@Patrick Walters - I answered your question on your other post here.

@Patrick Walters For Real Auction tax lien sales the amount you owe is the amount listed for the lien. All fees are included in the amount listed. Each AZ county Real Auction website has a "Tax Certificate Process" link on the left side of the main page. I copied this from the Yavapai county auction website:

Refundable and non-refundable fees

The advertised certificate amount consists of delinquent real estate taxes, accrued interest and penalties, a $10.00 certificate fee, a $10.00 taxpayer information fund fee, and an internet sale fee. Taxes, interest, penalties and fees are included in the face value of the certificate, they are interest bearing, and in Yavapai County.

PLEASE NOTE: The fees imposed on the Certificates of Purchase offered at a Tax Sale are assessed by statute, specifically, ARS 42-18118 (Certificate Fee) and 42-18116 (Processing Fee). In accordance with statutes, the processing fee is non-refundable (ARS 42-18153). The Treasurer does not make any guarantees that a purchaser will make money on a purchase and should be aware of the fact that the property owner has a right to redeem the tax lien AT ANY TIME.

If there is an asterisk (*) next to the advertised certificate amount; then a prior certificate or certificates exist on this parcel. In this case there is a $10.00 non-refundable fee per certificate included. (Contact the Treasurer’s office for the number of existing certificates.)

I have been buying AZ tax liens via the Real Auction website since 2010 and have never had to pay more than the amount listed. Note - the listed amount includes the interest through the end of February. If the owner redeems after the auction but before March 1, you get your money back with no interest. I had that happen for the first time last year.

@Ashleigh Evans, Thanks for sharing. What is the current value of the home? What are your plans for this home (keep as rental, sell, other)? Are you going to do this method again? What do you think was the reason this home was not redeemed by the owner versus most other tax lien homes that are redeemed? 

Great story, congratulations!

@Brendan G. McKenzie Sub accounts are where a person or entity can have multiple accounts used to bid in a tax lien auction. It used to be allowed in several counties in Florida and Arizona and may still be allowed in some states and counties. The advantage to having more than one account for bidding in an online auction is that if there is a tie on the winning rate bid, then the software randomly picks one of the winning accounts to get the lien. Many banks and funds would have hundreds of sub accounts that would bid the same rate. If I had one account and my bid (say 7%) was the winning bid - and a bank with 300 sub accounts also bid 7% for the same lien - then the bank had 300 chances to be chosen by the software versus my one chance.

Counties evened the playing field by only allowing one account for any one person or institution/fund.

I was looking through the Yavapai county Treasurer's website for the tax lien list for 2019 auction. The list is not published yet, but I did see this statement; 

"A parcel can now have multiple lien holders. We are in the process of updating our Investor Information."

This is a huge change from the past where a parcel in Yavapai county could only have one tax lien holder of all past tax liens. It makes a big difference in how an investor will work. 

I personally have bought some liens with the strategy of holding it only for a year and letting a new lien investor buy me out the next year. It also means that if there is a lien holder for a year before your lien, they can foreclose before you get a chance - there is a three year redemption period for the owner to pay off your lien before you can foreclose. If an investor holds an older lien than yours, they may be able to foreclose first. 

Maricopa county in AZ (Phoenix area) was the only county in Arizona that allowed multiple owners of liens on the same parcel. I know this is common in many other states as well.

More details when they county updates the website with the specific rules for multiple holders of a lien on the same parcel.

@Paul Wright may have some advice on this for you. He has experience with billboards.

@Amy Madison

Many people and investment groups like hedge funds came into tax liens as interest rates fell to almost zero percent on short term investments. 30-60-90 day, and even 12 month paper (money market instruments) were paying almost nothing.

With tax liens, investors who needed a short term holding were willing to hold a tax lien for a year and get 2%-5% with the underlying real estate as the collateral. The problem was that research had to be done on each lien to make sure the property was worth at least the value of the taxes owed. That is the "research intensive" part.

As interest rates move higher for short term paper, those investors who looked at tax liens for a one year holding (or less) will move back to commercial paper where there is less research involved to get a decent little return.

Short term commercial paper can be bought with large sums of cash. Those are the investments to which I was referring.

Does that help?