california tax lien help
Hello,
I am quiet new to tax liens. Can anyone be a mentor to me?
Specifically my questions are:
1) how to go about looking for these auctions in my area and other areas.
2) What to do when at the auctions?
3) process of auctions? Meaning how are the pricess set? What am I bidding for? Suppose the taxes not paid are $2000 and the bid goes all the way upto $4000, when I win the bid and pay the $4000 where is that money goin? Isnt it extra money for the state? Technically then someone can keep bidding up the price till it gets to or near the market value of the property. AM I CONFUSED HERE? 
3) Who to look for in doing the title search?
4) what is the interest rate that is charged on the money? Do I get to set the interest rate or is it already set by the state?
5) who do i report to if the payments with interest are not made
I am looking for a course or book on this topic and would kindly appreciate any recommendations. I am from california specifically BAY AREA. Please help <IMG SRC="images/forum/smilies/icon_smile.gif"> [ Edited by hansgill on Date 01/11/2003 ]
HI! Were you able to get answers to your post? I also have the same questions and was wondering if you could share the answers with me. Thanks.
Hi you know what I am still new myself and looking for different answers and opinions but one thing that I can advise you on is to read the book the "16% Solution" well I hope you take a look at that there is alot of good info.
here should be some help for you all in california.
which secure the payment of delinquent taxes or assessments due each foreclosing local taxing agency.
can be found in the following code sections:
For even more detailed directions, you can click onto the "Detailed Directions" link.
, just give the customer service representative the assessor's parcel number.
were also found at the following web site:
which secure the payment of delinquent taxes or assessments due each "foreclosing" local taxing agency. The culmination of this "foreclosure" process is a public oral bid auction sale of the property which is security for the delinquent taxes Ð the tax-defaulted sale. The proceeds of the tax-defaulted sale are used to pay the various local taxing entities the delinquent taxes and/or assessments due them together with any interest, penalties, fees and ÒforeclosureÓ costs.
Extraordinary investments await you if owners of real estate don't pay their real property taxes. How extraordinary? How Ôbout buying a house for essentially back delinquent taxes? Or how about loans with yields of 24, 26 to over 50%? Secured by a lien having a higher priority than a first deed of trust? With equity cushions of over 90% and loan-to-values of less than 10%?
Delinquent real property taxes can produce extraordinary purchase opportunities. For instance, delinquent California real property taxes give you an opportunity to buy California real estate for essentially back delinquent taxes. This occurs at so-called tax-defaulted sales.
Tax-defaulted sales are a type of foreclosure auction sale governed by Chapter 7 (beginning with Section 3691) of the California Revenue and Taxation Code. The tax-defaulted sales process outlined in Chapter 7 is that used by all local taxing agencies (e.g. counties, cities, school districts, etc.) except water and reclamation districts to collect delinquent taxes and/or assessments. This system involves the foreclosure of those liens (collectively referred to as the "real property tax lien"
The end result of this foreclosure process is a public oral bid auction sale of the real property securing the delinquent taxes Ð the tax-defaulted sale. These sales are conducted periodically , usually annually ,by each county tax collector.
The opening bid on each parcel of real estate coming up for sale can be as low as just the back delinquent taxes, penalties, fees and costs of sale ,amount which (given Prop 13) could be considerable less than 20% of fair market value! More specifically, Revenue and Taxation Code Section 3698.5 provides that the opening bid be computed as follows:
(a) The minimum price at which property may be offered for (tax-defaulted) sale pursuant to this chapter shall be an amount not less than the total amount necessary to redeem, plus costs. For purposes of this subdivision:
(1) The total amount necessary to redeem is the sum of the following:
(A) The amount of defaulted taxes.
(B) Delinquent penalties and costs.
(C) Redemption penalties.
(D) Redemption fee.
(2) Costs are those amounts described in subdivision (a) and (b) of Section 4112, Sections 4672, 4672.1, 4672.2, 4673, and subdivision (b) of Section 4673.1.
(b) This section shall not apply to property or interests which qualify for sale in accordance with the provisions of subdivision (b) of Sections 3692.
(c) Where property or property interests have been offered for sale at least once and no acceptable bids therefor have been received, the tax collector may, in his or her discretion and with the approval of the board of supervisors, offer that property or those interests at the next scheduled sale at a minimum price that the tax collector deems appropriate.
What's all this legalize mean? Simple. You could buy a $100,000 property for under $10,000! Or a $200,000 property for under $20,000! Or essentially just delinquent back real estate taxes, penalties, fees and costs.
Additionally, that property which you just bought at over a 90% discount would, almost always, be free and clear from all other monetary liens. Revenue & Taxation Code Section 3712 provides you receive title "free of all encumbrances of any kind existing before the sale" with certain narrowly defined exceptions. Section 3712 provides for the following exceptions:
(a) Any lien for installments of special assessments, which installments will become payable upon the secured roll after the time of the sale.
(b) The lien for taxes or assessments or other rights of any taxing agency which does not consent to the sale under this chapter.
(c) Liens for special assessments levied upon the property conveyed which were, at the time of the sale under this chapter, not included in the amount necessary to redeem the tax-defaulted property, and where a taxing agency which collects its own taxes has consented to the sale under this chapter, not included in the amount required to redeem from sale to the taxing agency.
(d) Easements constituting servitudes upon or burdens to the property; water rights, the record title to which is held separately from the title to the property; and restrictions of record.
(e) Unaccepted, recorded, irrevocable offers of dedication of the property to the public or a public entity for a public purpose, and recorded options of any taxing agency to purchase the property or any interest therein for a public purpose.
(f) Unpaid assessments under the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500) of the Streets and Highways Code) which are not satisfied as a result of the sale proceeds being applied pursuant to Chapter 1.3 (commencing with Section 4671) of Part 8.
(g) Any federal Internal Revenue Service liens which, pursuant to provisions of federal law, are not discharged by the sale, even though the tax collector has provided proper notice to the Internal Revenue Service before that date.
Combine Sections 3698.5 and 3712 and what do you get? You could buy a $100,000 property for less than $10,000 or a $200,00 property for less than $20,000 Ð and you would, almost certainly, own the property free and clear of all monetary liens Ð including all deeds of trust, mechanics liens, judgment liens, state tax liens, federal tax liens (if the Internal Revenue Service is properly notified), etc.
A free and clear property for, basically, back taxes! Or for literally pennies on the dollar.
Obviously attending tax-defaulted sales could lead to some truly extraordinary purchases!
Locating Law Governing California Tax Sales
The basic California statutory law governing tax sales in California (termed "tax-defaulted sales"
Revenue and Taxation Code ¤¤ 3691-3731.1 (being Chapter 7. Sale To Private Parties After Deed To State)
For an Internet web site which provides links to various sources of California law on the Internet, go to the following web site address:
http://www.law.cornell.edu/states/california.html#codes
California statutory law can be found at the following web site address:
http://www.leginfo.ca.gov/calaw.html
The California Revenue and Taxation Code can be found at the following Internet web site address:
http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=rtc&codebody=
More specifically, the above-referenced code sections can be found at the following Internet web site address:
http://www.leginfo.ca.gov/cgibin/displaycode?section=rtc&group=0300104000&file=3691-3731.1
The Tax-Defaulted Land Program managed by the California State Controller's Office instructs, advises and directs county tax collectors as to their duties under the law in the collection of property taxes, tax delinquency procedures, tax sales, tax defaults, redemptions, and the management and disposition of tax-defaulted property. Additionally, the California State Controller's Office publishes the County Tax Collectors' Reference Manual which contains information on the conduct of tax-defaulted sales can downloaded from the following Internet web site:
http://www.sco.ca.gov/col/taxinfo/taxref/taxintro.htm
Identifying Upcoming California Tax Defaulted Sales
The California State Controller's Office maintains a web site which lists upcoming tax defaulted sale for all 58 California counties at the following Internet web site address:
http://www.sco.ca.gov/col/taxinfo/defaultland/sales.htm
For instance, on of January 25, 1999, the Controller's web site listed the following sales scheduled in February and March:
County Sale Date Parcels Phone Address
Reported Number
For Sale
Los Angeles 2/9/99 2000 (213) 974-0414 225 N. Hill St., Rm. 100
Los Angeles, CA 90012
Tulare 2/11/99 119 (559) 733-6526 221 S. Mooney Blvd., Rm. 104E
ext. 208 Visalia, CA 93291
Imperial 2/11/99 1551 (760) 339-4295 940 W. Main St., Ste. 106
El Centro, CA 92243-2864
Contra Costa 2/24/99 197 (510) 646-4125 P.O. Box 631
Martinez, CA 94553-0063
San Benito 2/25/99 9 (831) 636-4034 440 Fifth St.
Hollister, CA 95023-3894
Ventura 2/26/99 75 (805) 654-3741 800 S. Victoria Ave.
Ventura, CA 93009-0001
Sacramento 2/26/99 277 (916) 874-6621 P.O. Box 1703
Sacramento, CA 95814
San Bernardino 3/8/99 5000 (909) 387-6411 172 W. Third St.
San Bernardino, CA 92415-0360
Tehama 3/12/99 160 (530) 527-4535 P.O. Box 769
Red Bluff, CA 96080
Riverside 3/15/99 3882 (909) 955-3951 P.O. Box 12005
Riverside, CA 92502-2205
Amador 3/17/99 34 (209) 223-6364 500 Argonaut Lane
Jackson, CA 95642-9534
Santa Cruz 3/19/99 66 (831) 454-2296 P.O. Box 1817
Santa Cruz, CA 95061-1817
Stanislaus 3/23/99 72 (209) 525-6388 P.O. Box 859\
Modesto, CA 95353-0859
Mendocino 5/1/99 42 (707) 463-4323 501 Low Gap Rd., Rm. 1060
Ukiah, CA 95482
The Controller's site does not provide lists of properties currently scheduled to be sold. However, as you can readily see, it does provide the phone number and address of the county tax collector's office. By contacting that office, you can find out how to obtain a list.
Additionally, the Controller's site has links to those counties (like Ventura, Sacramento, San Bernardino, Riverside, and Stanislaus) which have county home pages. Some of these county home pages have web pages devoted exclusively to the county tax collector's office. And some of the county tax collector's sites have information about that county's tax-defaulted sales.
Obtaining Information About
California Tax Collectors on the Internet
California tax defaulted sales are conducted by all 58 of the county tax collector's offices. A complete list of California county tax collector's by name with address, voice and fax telephone numbers together with e-mail addresses and links to web sites (assuming the county tax collector has such a site) can be found at the following web site address of the California Association of County Treasurers and Tax Collectors (CACTTC):
http://www.cacttc.org/ttclist.html
Also CACTTC has a good site you can use to determine if any particular California county tax collector has established an Internet web site:
http://www.cacttc.org/start.html
Other good sites to obtain information about the 58 California counties (to include county web site addresses) are the following:
http://www.com/hpi/ca/index.html
http://www.NACo.org/counties/counties/index.cfm
http://www.csac.counties.org/counties_close_up/county_web/data.html
Links to California counties having home pages can be found at the following Internet web site address:
http://www.csac.counties.org/counties_close_up/county_web/index.html
Web Sites of Individual California County Tax Collector's
The following are web sites maintained by individual county tax collector's offices together with individual pages within those lists, if any, having specific information about tax defaulted sales within that county:
Alameda County: http://www.co.alameda.ca.us/treasurer/
Del Norte County: http://www.geocities.com/CapitolHill/7960/
Registration Form: http://www.geocities.com/CapitolHill/7960/auctionform.html
Fresno County: http://www.fresno.ca.gov/docs/aud_web.txt
Humboldt County: http://www.co.humboldt.ca.us/taxcollt/index.htm
Kern County: http://bizweb.lightspeed.net/kcttc/taxsales.html
General Information: http://bizweb.lightspeed.net/kcttc/taxdeflt.html
Tax Sale Results: http://bizweb.lightspeed.net/kcttc/taxrslt.html
List of Properties: http://bizweb.lightspeed.net/kcttc/mar99.txt
Marin County: http://marin.org/mc/taxes/index.html
Tax-Defaulted Sales: http://marin.org/mc/taxes/Auction.html
Monterey County: http://www.co.monterey.ca.us/taxcollector/003TEXT.htm#DELINQUENT
(Note: As of the date of this publication, this site was still under construction.)
Nevada County: http://treas-tax.co.nevada.ca.us/
Tax Sales: http://treas-tax.co.nevada.ca.us/auctioninfo.html
Tax Lien Warning: http://treas-tax.co.nevada.ca.us/taxlienwarning.html
Orange County: http://www.oc.ca.gov./treas/
Tax Lien/Tax Sales: http://www.oc.ca.gov./treas/taxlien.htm
Placer County: http://www.placer.ca.gov/tax/
Tax Defaulted Sales: http://www.placer.ca.gov/tax/tax-sale.htm
Upcoming Sales: http://www.placer.ca.gov/tax/taxsalerslts.htm
Riverside County: http://www.co.riverside.ca.us/depts/treasure/
Tax Defaulted Sales: http://www.co.riverside.ca.us/depts/treasure/cvrshet4.htm
Questions & Answers: http://www.co.riverside.ca.us/depts/treasure/q&a3.htm
San Bernardino County: http://www.co.san-bernardino.ca.us/treasurer/
San Francisco County: http://www.ci.sf.ca.us./tax/
Tax Defaulted Sales: http://www.ci.sf.ca.us./tax/auction.ht
San Diego County: http://www.sdtreastax.com/taxsale/index.html
Location of Sale: http://www.sdtreastax.com/taxsale/location.html
San Mateo County: http://www.co.sanmateo.ca.us/tax/index.htm
Santa Barbara County: http://www.co.santa-barbara.ca.us/ttcpapg/
Delinquent Taxes: http://www.co.santa-barbara.ca.us/ttcpapg/delinq.htm
Tax Sale Information: http://www.co.santa-barbara.ca.us/ttcpapg/delinq.htm#p0
Shasta County: http://www.shastanet.org/shasta/sco_dept.html#tres
Solona County: http://www.solanocounty.com/treasurer/
Sonoma County:
http://WWW.SONOMA-COUNTY.ORG/perl/showcount.cgi?PATH=/main/phone#t
Stanislaus County: http://www.co.stanislaus.ca.us/taxtr/txtr327.htm
Tax Defaulted Sales: http://www.co.stanislaus.ca.us/taxtr/proptx.htm
Ventura County: http://www.ventura.org/tax_coll/auction.htm
Terms of Sale: http://www.ventura.org/tax_coll/saleterm.htm
List of Properties: http://www.ventura.org/tax_coll/list.htm
Yolo County: http://www.yolocounty.org/org/general.html#3
An Example of Using the Internet to Assist in Buying Tax-Defaulted Property Ð
1998 Ventura County Tax Defaulted Property Sale
Taxes paid to local and state government based upon the valuation of real estate (i.e. ad valorem real property taxes) are a way of life in the 58 California counties, all the thousands of counties composing the rest of the 49 states of the United States of America plus the District of Columbia and the Commonwealth of Puerto Rico Ð not to mention the various municipalities (i.e. cities, districts, towns and villages) and counties or regional districts composing the ten provinces and two territories of Canada.
And if those taxes aren't paid, something happens. Government will collect its taxes.
In California, those unpaid taxes are collected through an oral bid foreclosure auction sale called a "tax-defaulted" sale. And detailed information on some tax-defaulted sales has now come to the Internet.
The Treasurer-Tax Collector Offices for Ventura County had a web page devoted to its upcoming February 25, 1998 tax-defaulted sale at the following Internet web site address (or Uniform Resource Locator (URL)):
http://www.ventura.org/tax_coll/ventax.htm.
After arriving at this page, you could click onto the link entitled "Public Auction of Tax Defaulted Properties."
After doing so, you would have learned that the next Ventura County tax-defaulted sale was be held at 9:00 a.m. on Wednesday, February 25, 1998 at the Ventura County Government Center, Administration Building, Lower Plaza Assembly Room which is located at 800
South Victoria Avenue in Ventura, California.
Didn't know how to get to the Administration Building? All you needed to do was go to:
http://www.ventura.org/venwhere.htm.
You'd have gotten written directions together with a map.
What was coming up for sale? A List of Properties for Sale could have been found at:
http://www.ventura.org/tax_coll/list.htm
That list was regularly updated (with the date and time of last update provided) to reflect those properties which has been redeemed from the sale. As of December 26, 1997, there were 93 out of 104 properties originally listed for sale still scheduled for sale. As of February 19, 1998, there were 58 out of 104 properties originally listed for sale still scheduled for sale. The sales list contained the following notice: "NOTE: The current assessee has the right to redeem their property until close of business, February 24, 1998. Therefore, not all properties listed will actually be sold at the auction. An updated list is also posted at our office during office hours."
As is typically of the sales lists you obtained from county treasurers, the Ventura County Treasurer's Internet sales list provided little information about each property listed. Just the assessor's parcel number, a bare bones property description and the amount of the opening bid. For instance:
Item Parcel No. Location Minimum Bid
1. 003-0-150-170 GREENLEAF SPRINGS RD, LOCKWOOD $ 1625.00
2. 003-0-260-225 VACANT, LOCKWOOD 3225.00
3. 008-0-190-215 VACANT, CASITAS PASS 3275.00
7. 017-0-132-090 575 W EL ROBLAR DR, OJAI 25825.00
13. 068-0-142-115 1345 N OLIVE ST, VENTURA 22975.00
17. 084-0-180-055 2100 GOODYEAR AVE, 5, VENTURA 5050.00
24. 142-0-062-015 187 PRINCETON AVE, OXNARD 9950.00
28. 201-0-111-140 VACANT, OXNARD 3275.00
29. 201-0-122-010 155 N ROOSEVELT AVE, OXNARD 13800.00
31. 205-0-080-425 3111 S SAVIERS RD, OXNARD 32125.00
32. 205-0-570-045 1215 CHANNEL ISLANDS BLVD, OXNARD 11025.00
33. 206-0-263-370 3956 OCEAN DR, OXNARD 42300.00
36. 569-0-030-235 2196 SCENIC PARK ST, THOUSAND OAKS 17550.00
61. 658-0-010-420 VACANT, (PRIVATE)KELLY RD, T. OAKS 1175.00
68. 700-0-190-055 VACANT, 9801 YERBA BUENA RD, MALIBU 4025.00
70. 900-0-015-455 TIMESHARE - OXNARD 1250.00
Notice that the minimum opening bid for the 3956 OCEAN DR, OXNARD property (should it go to sale) was $42,300.00. Revenue and Taxation Code Section 3698.5 governs the computation of the minimum bid and provides in relevant part that "the minimum price at which property may be offered for sale ...shall be an amount not less than the total amount necessary to redeem, plus costs." Basically, the minimum permissible opening bid for a property to be sold at a California tax-defaulted sale is the back delinquent real property taxes plus penalties, interest and costs together with costs of the tax-defaulted sale (i.e. foreclosure costs). However, the county tax collector at his or her discretion can set a minimum opening bid at a higher dollar amount.
Unfortunately, as you can readily see, the list didn't provide much information about each property listed. Just the assessor's parcel number, a bare bones description (e.g., VACANT, CASITAS PASS; 575 W EL ROBLAR DR, OJAI; 2100 GOODYEAR AVE, 5, VENTURA; TIMESHARE - OXNARD, etc.) and the opening bid.
If you wanted more information about each parcel, you could have purchased an Auction Book which contained the "List of Properties for Sale" together with a complete package of parcel maps. The parcel maps are essential if you want to locate the vacant land being offered. The Auction Booklet could have been bought at the front counter of the Ventura County Tax Collector's Office for $10.00 or you could have sent a check for $12.50 (which included postage and handling) together with your name and mailing address to: Tax Collector, Attention Auction Booklet, 800 S. Victoria Ave., Ventura, CA 93009-1290. However, neither the Internet site nor the Auction Booklet provided current property use and characteristic information, comparable sales data or title information for the properties listed for sale. You had to obtain that information from some other source.
Is there anyway to use the Internet to find out more information about properties coming up for tax-defaulted sale? Yes, absolutely!
For instance, want assistance in locating the property? If you get a full street address. Take the "575 W EL ROBLAR DR, OJAI" property. You could capture the address and take it to the Yahoo Maps URL at:
http://maps.yahoo.com/yahoo/.
Paste in the address and you'll get a street map of the area in which the property is located. Zoom in on the address and you'll discover that the property is located on West El Roblar Drive between South Poli Avenue and South Alvarado Avenue.
Want directions to the property? Click onto the link entitled "Driving Directions." Then enter the address of your starting address (e.g., your home), click "Starting Address" and your computer gives you "the fastest path to your destination" with detailed written driving instructions together with a map. (For my home, the computer told me: "distance: 345.4 miles; duration: 393.9 minutes."
There's more. Want a list of sources for additional information? For instance, real estate agents. If you want to know the addresses and phone numbers of real estate brokerage firms in the immediate vicinity of the property, just click on the "Locate Businesses" link. You're at the Yahoo Yellow Pages. Click on the link "Real Estate Ð Appraisers, Mortgage Brokers, Real Estate Agents, ..." and you'll get a web page entitled "Real Estate." At this page, there're link for the following categories: Apartment Building Operators, Appraisers, Construction, Home Builders, Insurance, Mobile Home Parks, Mortgage Brokers, Property Management, Real Estate Agents and Title Companies."
Click onto the category "Real Estate Agents" and see what you get. When I did so, I found eight real estate brokerage firms within 1.6 miles of the property. You're provided with the name, address and phone number for each firm. And, if you want, driving directions and a map.
Obviously, a cooperative real estate agent could provide you with a great deal of free information about the property.
But there's another possibility. Title companies. In California, almost every title company will provide a FREE report on individual parcels of real estate called a "property profile." The property profile provides property use (e.g., residential building lot, acreage, single family dwelling, condominium, duplex, etc.) and property characteristic information associated with that use (e.g., for a single family dwelling, the number of rooms, bedrooms, baths, living square footage, lot size, etc.) Additionally, the profile provides comparable sales data to assist in property valuation. It even provides some title information Ð the status of the real property taxes and copies of any outstanding deeds of trust. And a parcel map.
If you want to locate any title companies in the vicinity of the property, just click onto the link "Title Companies." In doing so, I found eight title insurance companies within 17.8 miles of the property. Again, as with the real estate brokerage firms, the name, address and phone number for each company was provided. And, again, if you want, driving directions and a map.
You could call up one or more of these firms and order free property profiles from customer service. For those properties without complete street addresses (like "VACANT, CASITAS PASS"
Is there any other potentially helpful information you can get while you're at the Yahoo Yellow Pages? Yes. What about area public schools? By clicking onto the link entitled "Education and Instruction Ð Business, Colleges and Universities, Dance Studios, ...", you get to a web page entitled "Education and Instruction." At this site, there are links to "Elementary Schools," "Middle Schools" and "High Schools." Again, we'll get the school name, address and telephone number together with driving directions and a map.
Or what about area crime? By clicking onto the link entitled "Community and Family Ð Day Care, Libraries, Religious Institutions, ...", you get a web page entitled "Community and Family." At this site, there's a link to "Police Protection." Here you'll get the local police department together with address and phone number. Again, together with driving directions and a map Ð if you need them.
Additional specific information on individual properties can be obtained on the Internet. For instance, for a fee Experian provides on-line information on real property throughout California at this web site:
http://www.experian.com/cgi-bin/reis.cgi.
Experian provides three types of reports: a "Property Profile report," a "Recent Home Sales report" and a "Home Portfolio report." The property profile report provides details that public records show about a particular property and costs $7.95 per report plus applicable state and local sale/use tax. The recent home sale report provides comparable sales information and costs $9.95 for five matching properties (with $1.00 for each additional matching property) plus applicable state and local sale/use tax. The home portfolio report combines the above two together with U.S. Census Bureau information and costs $17.95 per report package plus applicable state and local sales/use tax. A sample of each kind of report can be found at the web site.
Using my credit card to buy a property profile report on "3956 Ocean Dr, Oxnard CA 93035" at this site, I found this property was a 7,131 square feet lot with a 1,188 square foot "Store Building" [small (to 3000 sq. ft.) one-tenant/occupied; retail 1188#]. Further the property was last transferred on March 24, 1993 with the transfer amount being $131,700.
The rules for the conduct of the Ventura County tax-defaulted sales (referred to as the "Terms of Sale"
http://www.ventura.org/tax_coll/saleterm.htm.
The terms of sale for any California tax-defaulted sale must be read by every potential bidder. For instance, reading the Ventura County tax-defaulted sale terms of sale, you would have found out that: "Payment by cash, Discover Card, cashier's check, or certified check in the amount of the bid awarded will be required at the time of the awarding of bid or immediately after the sale." Discover Card? What? No Visa, MasterCard, American Express? And no personal checks.
Additionally, reading the terms of sale, you might find that you could buy tax-defaulted property on credit. According to the Ventura County terms of sale:
Cash or Credit Sale: Pursuant to Section 3693.1 of the Revenue and Taxation Code, the Tax Collector may make the sale a cash or credit transaction. "In the event the Tax Collector approves the successful purchaser's request to treat the sale as a credit transaction, five thousand dollars ($5,000) or 10 percent of the purchase price, whichever is greater, shall be deposited with the Tax Collector and the balance of the purchase price shall be paid in cash in lawful money of the United States or negotiable paper as specified by the Tax Collector within a period specified by the Tax Collector, not to exceed 90 days from the date of the auction, as a condition precedent to the transfer of title to that successful purchaser..."
Five thousand or 10% of the purchase price down. Charge it against your Discover Card. And up to 90 days credit for the balance! Sounds good!
Some Risks in Buying at California Tax-Defaulted Sales
But there are some risks buying a California tax-defaulted sales.
For instance, California title insurance companies will not insure title to real estate bought at tax-defaulted sales until after the expiration of one year following the date of sale. Consequently, it's extremely difficult for a successful bidder to obtain permanent "take-out" financing secured by the property bought during the "not to exceed 90 day" period. However, I know of one bidder who did so by obtaining financing through a mortgage loan broker from a private party who was willing to overlook this difficulty Ð for an adequate interest rate return, of course.
And, as the Ventura Tax Collector warned in bold type in his terms of sale: "Failure on the part of the successful bidder to consummate the sale within the period specified by the Tax Collector shall result in the forfeiture of the deposit and all rights he or she may have with respect to that property."
Additionally, those terms of sale warn: "All lots or parcels of property are to be sold at public auction "as is" and in the order listed." Further, they go on to state: "The County of Ventura makes no guarantee, expressed or implied, relative to title, location or condition of the lots or parcels for sale, ..."
In other words, at California tax-defaulted sales, its caveat emptor - let the tax-defaulted sale investor beware!
Statistical Data on California Tax Defaulted Sales
The so-called "Annual Property Tax Delinquency Statistical Report" for currently fiscal tax years can be downloaded from the following web site address:
http://www.sco.ca.gov/col/taxinfo/taxdelinq/9697/9697rpt.htm.
For these reports, you can obtain statistically data about tax-defaulted sale on a county-by-county bases to include the number of properties actually sold during the fiscal tax year (July 1 to June 30 the following year) for each county.
California Tax Lien Certificates
On July 22, 1995, the governor signed into law a bill giving California counties the option, should any so choose, to sell tax lien certificates. The new law is Assembly Bill (AB) 946 which was chapter by the Secretary of State on July 24, 1995, as Chapter 189, Statutes of 1995. The new law was Part 7.5 of Division 1 of the California Revenue and Taxation Code, being Code Sections 4501 through 4531. These code sections can be found at the following web site address:
http://www.leginfo.ca.gov/cgi-bin/calawquery?codesection=rtc&codebody=4501&hits=20
Assembly member Louis Caldera (D, Los Angeles) stated that he introduced the legislation Òto provide counties in California with an additional revenue raising option by allowing them to sell their delinquent real estate tax liens to private parties.Ó
Currently, if a California property owner defaults in paying his or her real property taxes, the real property will ultimately be sold at a so-called Òtax-defaultedÓ sale. Tax-defaulted sales are a type of public oral bid "foreclosureÓ auction sale governed by Chapter 7 (beginning with Section 3691) of the California Revenue and Taxation Code. The "foreclosure process" outlined in Chapter 7 is the process which all local taxing agencies (i.e. counties, cities, school districts, etc.) except water and reclamation districts use to collect delinquent taxes and/or assessments. In effect this collection system involves the "foreclosure" of those liens (often collectively referred to as the "real property tax lien"
However, as Caldera stated, this process for Òcollection of delinquent property taxes is a procedure that can take up to five years or longer.Ó In the past, counties could either wait for delinquent taxes to ultimately be paid through the tax-defaulted sale process or borrow against this anticipated revenue by, for instance, issuing short term bonds. According to Caldera, his bill gives counties another and better option because it does not require counties to wait for their money or incur more debt. Additionally, according to Caldera, ÒAB 946 will also assist in enhancing a countyÕs credit rating by removing the risk of recovery on real property delinquencies without changing, in any way, the manner in which existing delinquencies are handled as far as the delinquent taxpayer is concerned.Ó
Caldera stated that: ÒUnder AB 946, a county can negotiate the sale of these delinquencies to a third party and immediately receive 100% of the amount of the delinquency, plus a premium negotiated by the county treasurer and the purchaser.Ó
How would this process work? A chart provided by CalderaÕs office explains: LetÕs say that a fictitious business, Overdue Company, owes $10,000 in delinquent property taxes. After Overdue fails to pay its taxes, a lien is placed again the property for the $10,000 plus a 10% penalty of $1,000. For each additional month Overdue fails to pay its taxes, interest at the rate of 1.5% per month or fraction thereof (for an annualized 18%) is charged.
Under AB 946 the county will now be able to immediately sell OverdueÕs overdue tax bill to the private investors. Revenue and Taxation Code Section 4528(a) of the new bill provides that: ÒThe tax collector may sell tax certificates by any form of public or private sale, including, but not limited to, an auction, a negotiated sale, or a bulk sale.Ó
Say, under a negotiated agreement, XYZ Corporation pays the county $10,000 for the tax lien plus one-half of the $1,000 penalty. After six months, Overdue Company pays the county the $10,000 in delinquent taxes, $1,000 penalty and $900.00 in interest. The county, having already collected and budgeted the $10,500 from XYZ Corporation six months prior, would then forward to XYZ Corporation the $10,000 in taxes plus $1,000 in penalty and $900 in interest earned during the delinquency period.
The bottom line: The county is able to immediately receive and allocated 105 percent of the taxes owed on the property. Plus the private investor gets an excellent return. The investor put up $10,500 dollars and six months latter got back the $10,500 plus an additional $1,400 Ð giving an annualized return approaching 27%! And the taxpayer paid exactly what it would have paid if the AB 946 had not be enacted.
Is there an market out there? According to Richard Heitmeyer, CEO of Capital Asset Research Corporation, the largest tax lien certificate investor in the county, preliminary estimates indicate that Los Angeles CountyÕs current tax delinquencies alone could be sold for almost $80 million dollars.
As stated earlier, the sale of tax lien certificates by each of CaliforniaÕs 58 counties is optional. Revenue and Taxation Code Section 4511 of the new bill provided that: ÒAny county may, upon the recommendation of the tax collector, and by resolution of the board of supervisions of that county adopted not later than September 15 of the fiscal tax year for which it is to first apply, sell tax certificates.Ó
No Takers to Date
According to a representative of Capital Asset Research Corporation, three counties initially considered doing using the new tax certificate legislation. Jim Matthews, Vice President - Research, for Capital Asset Research Corporation, stated that his company had been engaged in ÒdiscussionsÓ towards the purchase of tax certificates with three different California counties. Matthews refused to state which counties are being approached because it might alert competition.
One of those three counties may have been Los Angeles. A press release from Assembly member Louis Caldera (Democrat, 46th Assembly District, Los Angeles), who carried AB 946 for the sponsors, stated that: ÒAccording to Richard Heitmeyer, CEO of Capital Asset Research Corporation, the largest tax lien purchaser in the county, preliminary estimates indicate that Los Angeles CountyÕs tax delinquencies could be sold for almost $80 million dollars.Ó Joseph (Joe) Nicosia of the Office of State Controller, Bureau of Tax-Defaulted Land, stated that Los Angeles County was one of two counties (the other being Sonoma) which he knew had contacted his office for further information on the implementation of this new law. Nicosia is charged with the responsibility of updating the State ControllerÕs County Tax CollectorÕs Reference Manual to provide counties guidance on the implication of this new law.
Unfortunately, however, according to Karen Green of CalderaÕs office, no county took advantage of the new legislation authorizing the sale of tax certificates. Part of the reason is the original July 1995 legislation itself Ð apparently the county tax collectors felt it didnÕt provide sufficient guidance.
In an effort to remedy this problem, ÒcleanupÓ legislation amending a number of the Revenue and Taxation Code sections was passed, taking effect on January 1, 1997. Even after the passage of the cleanup legislation, according to lobbyist Josh Pane who worked on that legislation, no county was willing to take advantage of the amended law. Further, he stated that the California Association of County Treasurers and Tax Collectors (CACTTC) was still not satisfied with the "cleaned-up" tax certificate law and that CACTTC might sponsor additional cleanup legislation at a latter date. However Barbara Coates who is the Chairperson of the CACTTC Legislative Committee told me in a e-mail message the following:
We did participate in a year long process of developing clean-up legislation
which was passed, I believe, in '96. We have not worked on the issue since
then, and to my knowledge have no intentions to do so.
To the best of my knowledge, no county is looking at selling tax lien
certificates. There are still considerable problems with the program as
adopted by our Legislature. Orange Co. had some program as a result of
their bankruptcy, but I don't think it follows this program exactly. You
could contact them for additional information.
An Interesting Article
For an interesting February 8, 1998 article by Jonathan Lansner in the Orange County Register on public confusion over the California tax certificate law allegedly generated by "Infomercial makers and Internet hucksters," see the following Internet web site address:
http://treas-tax.co.nevada.ca.us/taxlienwarning.html
According to this article, Patricia Berger "of Sierra Madre paid off a $41,814, 5-year-old tax bill on a South Laguna home assessed at $515,214 and filed a quit-claim deed with the county, claiming that she now owned the home." Apparently, Berger thought she had "found gold in the latest get-rich-quick scheme" Ð Orange County, California tax lien certificates. Lansner stated: "According to her attorney, Berger mistakenly believed that by paying the tardy tax bill, she owned the property." However, as stated above, none of the 58 California counties has implemented the 1995 California tax certificate legislation. And, even if Orange County had, the system Berger used to attempt to obtain title to the South Laguna property (i.e., filing a quit-claim deed) is not that provided for in the tax certificate legislation!
What did Berger get for her ignorance? According to Lansner: "...a court-ordered eviction ... Plus, she was hit with a $16,500 damage award." Further, according to Lansner, "She is appealing the decision, with her attorney claiming that the owners should reimburse her for what is now a gift of paying off an old tax bill." A heavy price for ignorance.
Trying to Cut the Small Investor Out?
According to a Committee Report of the Assembly Committee of Revenue and Taxation, support for this new law came from Capital Asset Research Corporation and Lehman Brothers. The opposition: ÒNone to date.Ó
However, maybe someone ought to speak out in opposition for the small investor. Why? An argument can be made that the sponsors of this bill are attempting to cut the small investor complete out of the future California tax lien certificate market. They want this potentially lucrative investment market completely to themselves.
And it appears that they were willing to mislead the legislature to do it.
For instance, the Committee Report states that: ÒMost Other States Have The Option [of issuing tax lien certificates] Currently Available To Counties.Ó The Report goes on to state: ÒAt this time 28 other states have adopted laws to allow counties to sell tax certificates or an equivalent. The sponsors indicate several other states have legislation pending at this time to authorize similar programs.Ó The report states further: ÒGenerally, firms like Capital Asset Research Corporation purchase tax certificates in large numbers, often totaling from hundreds of millions to a billion dollars. The benefit to the county results from the purchaser providing immediate cash to the county for the value of taxes owned and some portion of the penalty, while obtaining rights to interest which accrues during the delinquency period. Upon payment to the county by the delinquent taxpayer, or new purchaser, the county transmits the principal, penalty and accrued interest to the investor, and the tax certificate is canceled.Ó
What the report didnÕt tell the legislators is that almost all of the 28 certificate states require that tax certificates must be sold at public oral bid auction sales Ð where anyone with money to invest who wishes to buy can buy, not just the big moneyed sponsors. The little guy can get the same high returns that the Òbig guyÓ sponsors covet.
What does the new California law state: ÒThe tax collector may sell tax certificates by any form of public or private sale, including, but not limited to, an auction, a negotiated sale, or a bulk sale.Ó For act sponsors, the operative words appear to be Ònegotiated,Ó Òprivate,Ó Òbulk sale.Ó
What kinds of returns do the sponsors feel theyÕll be cutting the small California investor out of? A chart provided by CalderaÕs office which outline how the new California tax lien certificate process would work showed a negotiated sale of a $10,000 tax lien to ÒXYZ Corp.Ó Ð and gave that corporate buyer an annualized return approaching 27%!
What makes these returns even more attractive is the high quality of the security. These high returns are secured by the real property tax lien Ð a lien senior to even a first deed of trust. And since this senior lien secures just back delinquent taxes, penalties and interest, a tax lien certificate investorÕs loan-to-value is generally quite low Ð often under 10% of the value of the property.
This is a lot of great information and great links. And it all depends on where you are in CA. The Bay Area will not quite work this way. Our county for example has not had a property for sale in over 12 years. When there is a property defaulting, the mortgage company will put the house on the market for full market value. The house is usually snatched by a regular purchaser on the market and it never makes the auction. Land is a little different though. Here in CA we're still a little behind and bid all the way up to fair market value, at least some do. The nice thing about a deed state though is that you are not bidding on a lien, but for the actual deed of the property for the amount of the outstanding taxes. Just finding that jewel is harder than it sounds.
Good luck.
God Bless that man!
Nice posting repetitive and fat. I loved it. Just one www.thing.One small little thing.
The bidding starts and away it goes. It of course passes the amount of taxes and costs due. Up up up until it is almost to full market price or like last March way past.
My question who gets this overage amount? Does it get held and then assigned to the General Fund? If not where? Is the overage amount then sent to the old property owner who let the taxes go delinquent? Please tell me.
If the old property owner can claim this overage. I know a lot of properties of little value, some up and straight down. Some down and straight up. Not on streets of record. Inhabited only by old Coyotes who have conquored the laws of gravity. I shall buy them let them go tax delinquent. And as the newbys bid them up up up. I shall wait until finalization of sale and submit my claim for the amount over the tax bill and cost bill.
Please tell me I am wrong?
Failing that I shall continue to cure those properties which have gone tax delinq. prior to sale. I know you do have to run, but driving is fun and you meet some very interesting flacky persons who do not handle their affairs too well. In my experience the best running is about the three year plus. You become more intense as the great day of sale www.arrives.Of course you never bid the sales. I mean check the spikes in so called value.
You may if you are civic minded send a mailer out to all those nice people who overbid like crazy. Some may have had a moment of lucidity and would like to recapture some of their investment. Or sometimes all of it if they can absorb the necessity of an 85 year payment plan at 1/2 %......
Please advise.us. Lucius 8-) 8-)
In response to lufos question re: tax bidding overages, this very subject came up at an office meeting wed past and one individual with 40 yrs in the RE biz and currently trying to capture a $200,000 piece of property for about $11,000 tells me the overages go to the previous owner who owed the taxes, In this particular case he died intestate, Did I fail to mention our state is broke, I'll bet I know who will end up with any extra dinero
Lucius--------------
The "overage" or "excess proceeds" from sales of properties at CA tax sales can be claimed by any "party of interest." This means property owners and those with encumberances against the property. They have 1 year from the recordation of the tax deed to get their claim in to whichever county officials are handling the excess proceeds, which may the treasurer, the auditor, the board of supervisors, perhaps some other office.
By state law, whenever the excess proceeds more than about $200, I believe, the tax collector must send a notice to the parties of interest about the excess proceeds.
The excess proceeds are paid out in order of priority of liens, judgments, and other obligations on the property, with the property owner coming in last in line.
There is about a 5-6 month gap between the time that the claims period expires and you actually get a county warrant to pay your claim. So you get paid off about 18 months after the auction date.
I have done as you suggest several times, letting properties sell at the tax auction and then claiming excess proceeds. I know another person who has done so successfully also. I call this technique "CEx PATS," for "Claiming EXcess Proceeds After Tax Sale" in my book on CA tax sales investing.
In 2003 I collected over $47K from the 2002 sale of a property that I owned in Contra Costa County. I had bought it for about $2500 about 12 years earlier, before a scheduled tax sale of the property. Pretty good return. I then invested that money into tax resale properties in OK, getting rental returns now.
Good Investing**********Ron Starr************
The long message with all of the website addresses are outdated. Could you please provide updated websites for the information provide.
Could you please provide the websites as soon as possible for the southern california area Orange, Ventura, Los Angeles, and San Bernadino counties.. mainly.
Respectfully
Casa Improvements
I don’t know how LA or WY do their tax lien sales but am interested in learning.
Are you saying you want to sell the tax lien certificate before the redemption period is up or do you want to sell the property you got at the tax lien sale? I’m guessing you want to sell the certificate but please clarify. Sorry for me being dense.
Hello,
Have you or do you know of anyone whose brought tax liens in Alabama?