Left Over Properties
Greetings everyone!
I am really interested in purchasing the tax lien certificates directly from the state on properties that are left over after the tax lien sale/auction. Why? For two main reasons:
1. I won't have to compete with other investors who are bidding down the interest rate at the auction, and there fore, I can:
2. Obtain the maximum interest rate.
It just seems so much easier and the rate of return is higher. What am I missing? Does this plan sound reasonable?
What is the process for obtaining the property directly from the state (Alabama)?
Where can I go for more information on this method?
Any one want to share their experience with this method? I really appreciate your advice.
and in Illinois all properties not bid on in 3 years are rolled over into a scavenger sale where the bid is not about the interest rate but the tax certificates themselves are discounted ($10,000 certificates selling for $50).
The question is how efficient is your tax sale? If there are lots of investors researching and bidding on properties then it is quite likely that those not on actually have no value.
My favorite was the 10 foot by 10 foot lot which the electrical utility had not paid taxes on. Used to be a transformer pad now abandoned. Has absolutely no value. So do not assume that all parcels are worth more than their taxes.
If you want to maximize the income (from a higher interest rate) you need to be careful that you will get your money back.
As noted, the liens that have not sold could come from one of two situations.
1. They were not sold because there was a surplus of inventory compared to what the willing buyers needed. Everyone left the auction with what they wanted and there was more 'good' liens left.
2. If the auction is very active then what is left over is the stuff that others have decided was less valuable or maybe even no value.
If you really want to maximize the chance that you will get your funds back you need to bid on property that is improved and has more then one person interested in not losing it. A home owner with a mortgage is perfect. If the homeowner does not pay it off the mortgage company will.
John
[addsig]
One more things...
If you have a lot of money to invest then liens might be time consuming compared to the amount you can put to work on any one transaction.
You can consider buying discounted notes. You can earn more or less similar returns. You can also look at more states as liens are only sold in a percentage of all the states in the US.
John
[addsig]
What are discounted notes, how does one invest in them, what are the returns and what are the risks?
Scott
Regarding Your Questions about Alabama and County Held Certificates:
Tax liens which are not sold at the primary certificate sale in May are 'assigned' to the state via a certificate of purchase. The issue that I have found in Alabama is that each county has some discretion over how they choose to sell the tax liens. You have several 'post sale' opportunites in Alabama:
1) after the May sale - you should check out the Code of Alabama Article 1 Section 40-10-20.
2) Alabama Land Sales - if 5 years have passed since the original tax lien sale the land commissoner with the approval of the Governor may sell the land at a private sale 'for cash at the best price obtainable'. When you purchase at a land sale you are purchasing a full deed with no right of redemption.
3) Alabama certificate sales - if less than 3 years have passed since the lien sale then liens will be sold subject to the remaining right of redemption.
My experiences in Alabama is that in Jefferson County you will find about 6,500 to 8,500 'Sold to State' listings. You can contact Jefferson County by calling 205-325-5084.
Best of luck!
Additional information regarding "left-over" liens:
1) Unless you are a developer be VERY wary of these parcels. I know of several that were at the bottom of a lake (really) but had a few that abutted the lake directly. A developer bought them and developed boat docks and a resturant. Unless you have deep pockets and knowledge this would be difficult.
2)Sometimes there are significant risks associated with these properties. For example a road or factory being build close to the location (or even worse a landfill or hog farm).
Unless you have years of development or tax lien experience I would avoid these as the likelyhood of getting your money back is much lower than "developed" properties...
[addsig]
I do not know of other states but in Florida the property appraisers have pictures of the property online along with flood information. Also, a lot of counties will let you know if the tracts are inaccessible, if the home has been condemmed, etc.
I buy tax certificates from those that have been struck off to the county, take pircures from all sides of the lots (i deal with vacant land). That way I can provide folks who want to buy the certificates from me with pictures of the lot, pictures of any homes on that block or in that subdivision.
A lot of folks buy lots that they have not seen personally - yes it is risky but not if you deal with a good agent. I go to sales and bid on lots for other folks I do a lot of research on the lots and try my best to discourage them if I think the lot is not worh the bother.