Tax Lien Sale
(excerpts courtesy of Douglas County Treasurer)
Purchasing delinquent tax liens at sale is becoming an increasingly popular form of Investment. Here are some facts to help you understand what a tax lien sale investment is, and what it is NOT:
- When you purchase a tax lien sale certificate on property, you become a lien holder on the property. In essence, you loan funds to the owner to pay taxes. The interest rate is attractive and your investment is secured by the potential of getting title to a piece of property in a few years.
- You purchase the tax lien, and not the property. Let’s make that clear, you do not own the property at this stage. After a tax lien is sold, the owner of the property continues to retain all of the rights as a property owner. The tax lien buyer has a security interest in the property and at that time does not have title nor entitled to possession. The eventual transfer of deed to the person purchasing a tax lien in very few cases ever occurs.
- Investing in tax liens through purchase at tax lien sale is just that — an investment. The purchase can be thought of in terms of a potentially long range certificate of deposit. The C.D. is cashed out at a given rate of return, and can occur up until the time a Treasurer’s Deed is issued or until 15 years from the date of sale -whichever comes first.
- The State Banking Commission determines the rate of return. The annual percentage rate is set at nine points above the Federal discount rate as of September 1. The rave in November of 2005 was at 14%.
- Be aware of what you have as risks, all sales are made with a “buyer beware” warning. While the county official makes every effort to remove property with bankruptcies, FDIC or RTC connections, the county department cannot guarantee a property to be buildable or desirable. The purchaser at a tax sale buys at his peril.
The tax lien sale begins early in the day and continues until all tax liens are offered. The sale is conducted as an open auction to the highest bidder.
Any parcel not bid on during the sale will be held open for purchase in the Treasurer’s office until the following day, after which it will be struck off to the County.
There will be absolutely no transferring of purchases from one name to another after bidding is made. If you wish to transfer the certificate, assignment can be made after the certificate of purchase is received.
No County official, employee, immediate family member, or person acting as an agent for same, may participate in the tax lien sale.
After June 15 of each year, all tax lien sale certificate holders have first option to pay any subsequent years’ taxes which remain unpaid on properties for which they hold liens. These tax liens are endorsed on the original certificate at the same guaranteed rate of return.
THE PROPERTY OWNER REDEEMS: If the owner shows up prior to issuance of the tax deed, the owner must pay the entire amount paid by the owner of the certificate, allowable costs, interest and fees provided by statute. The owner who redeems prevents a transfer of title by tax deed.
THE ISSUANCE OF THE TREASURER’S DEED: A Treasurer’s deed may be issued three years from the original date of sale on a Certificate of Purchase. At that time the Certificate holder must:
- Surrender original certificate
- Complete treasurer’s deed application form
- Remit appropriate deed fees
Deed application involvement:
- Property owner of record is notified of deed application and given two weeks to redeem before deed procedures start.
- At this point, if the certificate has not been redeemed, the certificate holder will be notified that a $500 deposit is required to continue deed application. No interest is earned on the deposit.
- Remittance of $500 deposit covers:
- advertising fees
- certified mail fees
- title search fee
- miscellaneous legal fees
- Current year assessed taxes and any subsequent tax liens should be paid prior to issuance of deed, however, it is recommended that at least the current year assessed taxes be paid. If redemption is made before deed issuance, all redemption money and deposits will be returned to the investor.