Tax Lien Sale – Research Time

If you are looking for a different way to try to get higher interest on your money, think about checking out your county’s tax lien sales. Our county sells the lien certificates to investors and when the property owner pays back the lien, they pay 10% interest on the money and it get’s passed through to the investor.

When I wrote Tax Lien Certificate Sales – Sure Thing or Risky Business  I said that I was going to try to sit in on this year’s tax sale in my county. As I go through the process for the first time I will share my activities with you in several posts. This post is about finding the list of properties in arrears that will have tax lien certificates sold and doing the research needed prior to the sale date.

When Are Tax Lien Sales Held?
The states that sell tax lien certificates set their own sale dates and they cover the range from winter to to spring to summer to fall. In some states, each county gets to set their own sale date. In other states there are multiple sales a year.

In my state, all counties hold their tax lien certificate sales once a year on the 4th Monday of August. The lists of properties that will have their tax liens sold is published both in a local paper (3 weeks running) and on the county’s website. Other states hold their sales at different times of the year. Arizona, for instance held their 2011 sale in February.

How Do You Find the Sale List?
The county holding the sale typically has a government website with information about where the list is to be published or how to obtain it. For instance, this link is to the Maricopa County Arizona Treasurers office. It is a list of frequently asked questions about tax lien sales. It includes information on where and when the list is published “The parcel list will be advertised in the Arizona Business Gazette. The publication date is January 20, 2011. You may also access the list at approximately one week after the publication date.”

What Does a Tax Lien Sale List Look Like?
My county’s list is out! I have snagged a copy of it from the county website in PDF format and have started to poke around in it to see what I can find out about the properties that have liens.

The list provided by my county has the following columns:
Parcel Number
This is a long string of numbers that you can use to look up the property on the county’s website – for example 08‐6.0‐13‐000‐000‐010.002

Owner’s Name and Address
The mailing address of the owner plus the physical address of the property is included.

Legal Description of the property
This is the language that is on the deed – ours is in Township speak for example: one legal description says PART OF E 1/2 OF SW 1/4 ‐ BEG ON W LINE OF E 1/2 OF SW 1/4 AT A POINT 1250′ N: TH E 290.4, S 300′.

5 columns of years
This show, for each year, what the taxes in arrears were.

Printing fee

Recording fee

Total amount I would have to pay to buy the tax lien certificate on this property.

Checking Out the Listed Properties
Before you begin to research the actual properties that have tax liens, you should review the county’s procedures and regulations governing the tax lien sales and be aware of all the possible consequences of buying a lien.

In my state, for instance, tax liens against a property are very good thing to have as they are senior to most other kinds of debts (meaning you would get paid first if the property is sold). The owner has a year to redeem the property by paying back due taxes, penalties, interest and fees – even after the lien is sold. If the taxes, penalties, interest and fees are not paid, the person holding the lien certificate has the opportunity to pursue foreclosure and get the property for the amount paid for the lien certificate. If the taxes, etc are paid, the county sends along the payment to you, the owner of the lien.

This is only my state, each state and sometimes county is different. Research the counties in which you would be buying.

What Characteristics Do You Want?
In our state, the sale is August 22. In order to participate I need to do my research to find the tax lien certificates I want to consider bidding on. Before I can select properties to research, I need to understand the qualities in which I am interested.

Because I am not interested in actually obtaining the property (but realize that I could end up with it anyway) I am looking for:

  • Something that is not too far from my residence (I live in a big county).
  • A property that has it’s improvements (buildings) valued at 2/3 or more of the total assessed value (because unimproved property is harder to get your money out of).
  • A property that is being offered for the first time (has only 2 years of back taxes owed).
  • A total amount that is $2,000 or less (because I am chicken and don’t want to go in for a lot the first time).
  • A property that is not in foreclosure or for sale (indicating that the owner probably won’t pay the back taxes).
  • A property that is relatively new (in case I end up with it!).
  • Owners that are not in bankruptcy (because my claim to the property would fall behind others if the back taxes weren’t paid).
  • Property owned by a real person not a corporation (because I feel that the people may be more apt to pay the back taxes).
  • Property owned by one person or a married couple (just to keep things simple).

You may think my list of requirements is too long, but this list is 25 pages long – each with 7 to 8 properties listed on it. That is between 175 and 180 properties from which to choose.

How Can You Research the Listed Properties?
Suggestions range from getting buddy, buddy with someone in the county offices, to chatting neighbors of the property up to discover information about it. Here is what I am doing and planning to do.

I’m starting by looking for the property in my counties GIS data (Geographic Information System).  I can search any of several criteria:

  • Parcel Number (that long string of numbers mentioned above)
  • Owner Name (last first)
  • Address (address of the property)
  • Deed (Grantor name, instrument number, file date or year)

What do I get when I find something based on the above search? All kinds of interesting information.

I see the assessor’s data which includes parcel number, owner, owner address, physical address, property legal description, number of acres, block and lot numbers and a link to a map which shows me where the property is located. Some records even include a picture of the property!

In the the tax information section I see the tax code, city code and TIF code as well as the section number, township number, and range number. In addition in this section is the zoning description (eg. AG AGRICULTURAL DISTRICT) and a link to any zoning restrictions for that zone.

In the residential structure section I see the type of residence (eg. SINGLE FAMILY RESIDENCE), the style (eg. ONE STORY), the frame (eg. STUD FRAME), the quality (eg. FAIR), the year built, the total floor area in square feet, basement area and finished area in square feet. Some records indicate that there is either an attached or detached garage and gives the number of square feet in those as well.

In the current appraised value section I see rows for residential, agricultural or commercial. For each row there are columns to show the land appraised value, the improvements appraised value, the total appraised value and the assessed value.

In the collector’s data section, I see a table with the tax year, the owner name, the tax amount, whether the owner protested the amount or not, the date the taxes were paid and whether or not it was a tax sale.

The recorder’s section shows how the property is recorded in the county books. Who granted the property to the current owner and who the grantee is (current owner). It shows the county’s book, page, year recorded, instrument number, instrument date and file date.

From here, I start seeing what I can find out on the internet and making notes in a spreadsheet on each property. I just do a search on the property address. Sometimes this will pull up a sale listing or a zillow estimate. If it is for sale, I look at the listing price and see how long it has been for sale. I think that a property that has back taxes due and is for sale is a property that will not have the back taxes paid!

I look for the address on google maps and see if google earth has any views of it. I think about where it is (how far from home, is it in a place I know has flooded frequently, is it in area I know is really not a growing neighborhood or is actually not a safe neighborhood).

Then I search for the owner names to see what turns up. I also search the court case database that my state makes public. It shows residents of the state who are involved (on any side) in a lawsuit. You can’t tell much about the case from the data, but if the owner was involved in a lawsuit, I would tend to not want to bid on their property’s tax lien. Chances are they have had collectors after them, they are filing bankruptcy, or at the very least are prone to suing people.

After I make it through the list doing the above searches, I plan to drive by some of the properties (the ones that made it past the first round of inspection).

Would you spend this much time and take on these kinds of risks to earn a higher interest rate on your cash?

If you have ever participated in a tax lien sale, please leave a comment!

How would you go about researching the properties that are to have their tax liens sold?
Disclaimer:  By publishing this article I am not advising or advocating participation in tax lien sales.  I am not an expert on tax lien sales, I am relaying personal experience only.

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