While generally you hear about tax lien investing in terms of residential properties, there are times when commercial properties will also come onto the auction block. There may be a particularly high volume of retail property in Grand Junction, Colorado, if local businesses do not step up their tax payment schedules. Grand Junction reported at the end of this month that 469 businesses are delinquent in paying city taxes and that nearly half of those are delinquent for more than nine months[1]. While the city has attempted to collect on these debts by ramping up contact with errant business owners and targeting the “biggest, riskiest offenders or most high-profile businesses first,” said Grand Junction’s chief financial operations manager, Jodi Romero, it may be necessary to seize some of the businesses and auction their assets. This could include the business’ properties in cases where the enterprise has a storefront of some sort.

While lien-holders often pony up the money for delinquent property taxes on retail buildings in order to keep their collateral intact, those businesses that own their own buildings could see their physical store locations on the auction block if they fail to make good on the money that they owe.

Would you buy commercial property at a tax lien auction?

Thank you for reading! Your comments and questions are welcomed below.

In one Canadian city, if your “story” is sad enough, the city will buy your property tax lien and hold it until you can pay it[1]. In the city of Naniamo, the annual tax sale will be pretty dull this year for investors since the city itself has already announced that it will “outbid all other bidders” at the tax sale auction this week. The result will be that the city will hold the debt rather than a private citizen, giving the homeowner more time to work out a solution to their problems and pay off the dent. Private citizens can foreclose and sell the home after one year, while the city plans to be far more lenient.

According to Nanaimo’s city financial director, “the change underscores the belief that [the purpose of] the tax sale is to collect taxes, not sell the homes of those in tax arrears.” Proponents of this policy argue that unavoidable disasters like job loss, family death, illness, injury and breakup should not result in the loss of a home, since taking the property on top of the other problems amounts to kicking the homeowner when they are down. Not surprisingly, however, there is a fair amount of concern that this new policy could set a lousy example for people who may have deliberately opted not to pay their taxes or purchased a property out of the viable range of their income.

Furthermore, when the immediate threat of the loss of property is removed, it may simply prolong the redemption period on the taxes. Currently, about 75 percent of delinquent homeowners redeem their property tax liens before auction. The city is arguing that the step does not put the government at any additional financial risk because it can still sell the properties at fair market value should the additional step to help the homeowner in question fail.

Right now, this is a localized Canadian policy. However, it sounds like the sort of idea that could easily take hold in our U.S. housing market as well, threatening tax lien investing in an entirely new way. Do you think that this is a good move or a bad move for cities trying to recoup losses due to unpaid property taxes?

Thank you for reading! Your comments and questions are welcomed below.

[1] http://www.canada.com/sale+policy+well+conceived/3595594/story.html

In one Canadian city, if your “story” is sad enough, the city will buy your property tax lien and hold it until you can pay it[1]. In the city of Naniamo, the annual tax sale will be pretty dull this year for investors since the city itself has already announced that it will “outbid all other bidders” at the tax sale auction this week. The result will be that the city will hold the debt rather than a private citizen, giving the homeowner more time to work out a solution to their problems and pay off the dent. Private citizens can foreclose and sell the home after one year, while the city plans to be far more lenient.

According to Nanaimo’s city financial director, “the change underscores the belief that [the purpose of] the tax sale is to collect taxes, not sell the homes of those in tax arrears.” Proponents of this policy argue that unavoidable disasters like job loss, family death, illness, injury and breakup should not result in the loss of a home, since taking the property on top of the other problems amounts to kicking the homeowner when they are down. Not surprisingly, however, there is a fair amount of concern that this new policy could set a lousy example for people who may have deliberately opted not to pay their taxes or purchased a property out of the viable range of their income.

Furthermore, when the immediate threat of the loss of property is removed, it may simply prolong the redemption period on the taxes. Currently, about 75 percent of delinquent homeowners redeem their property tax liens before auction. The city is arguing that the step does not put the government at any additional financial risk because it can still sell the properties at fair market value should the additional step to help the homeowner in question fail.

Right now, this is a localized Canadian policy. However, it sounds like the sort of idea that could easily take hold in our U.S. housing market as well, threatening tax lien investing in an entirely new way. Do you think that this is a good move or a bad move for cities trying to recoup losses due to unpaid property taxes?

Thank you for reading! Your comments and questions are welcomed below.

A group of Illinois County Board members will be investigating a former county treasurer for taking campaign donations from real estate investors who stood to profit – and did profit – from his tax lien auctions[1]. The treasurer, Fred Bathon, received about $140,000 from investors who were involved in buying delinquent property tax debts at his tax lien auction sales. These investors then purchased the debts at the maximum penalty rate, 18 percent, and were able to bring in about $200,000 each in penalties for a number of years.

While buying tax lien properties at the maximum penalty rate is perfectly legal, in Illinois the bidding process on tax liens can involve “bidding down” the interest rate on the liens. If these liens were not exposed to the entire buying population, then the entire process could be a problem. At some of Bathon’s auctions, it was reported that literally whoever shouted the loudest, lowest percentage bid got the property, so if everyone shouted 18 percent someone – whoever was perceived to have shouted first – would get the property at that amount and bidding would be cut off. This method has historically been used to prevent bidding down and to keep buyers from undercutting each other, a process that benefits the debtor rather than the purchaser of the debt.

The present treasurer allows bidders to submit trailing bids, allowing for undercutting. He says that he “welcomes public scrutiny” of current and past tax auction practices.

Do you think that Bathon and/or the investors involved should be punished for their participation in what appears to be a very sketchy method of selling tax liens? Is Bathon wholly responsible or do the donating investors deserve some of the blame?

Thank you for reading! Your comments and questions are welcomed below.

At a tax lien sale in Lenawee County, Michigan last week, only four properties of the 32 available were even bid on, indicating a continuation of massive buyer disinterest in the area first indicated at the initial auction in July where only 20 of 52 parcels were sold[1]. At a time when many small municipalities are hoping to fund entire budgets or make up budget shortfalls by auctioning off property tax liens to help avoid raising taxes on the rest of the town, Lenawee’s treasurer was disappointed by the lack of sales.

Particularly given other Midwestern counties’ successes with tax lien sales – last week we reported on a sale that set records for attendance and participation – this second-chance sale was viewed by the city with great optimism. However, for this county, the results were not all that was hoped. The county hopes to establish a “land-bank program” that will purchase properties that appear to have potential from the city in order to make improvements that will attract buyers.

The four properties that sold at this auction faced no competition during bidding. Does this sound like a missed chance to you or do you prefer higher-intensity auctions for your property tax lien investing?

Thank you for reading! Your comments and questions are welcomed below.

In most tax lien auction situations, there are a few “plum” properties that get a lot of investor attention while a number of unsalable properties sit on the sidelines and eventually go back to the city to stagnate indefinitely. However, these days in some counties, the tax lien auctions are selling out.

At a tax auction last week in southern Michigan, buyers came from as far away as California and Alabama to bid on the 102 properties up for grabs. All of the properties sold[1]. Bidding started at $50 but skyrocketed into the thousands in many cases. Interestingly enough, while there were some out-of-towners, most of the participants were local, according to the county registration records. The county treasurer attributes this large local participation to the fact that a lot of young couples in the area who cannot buy homes in a traditional fashion right now are investing in fixer-uppers.

How do you think this new influx of participation will impact your tax lien investing?

Thank you for reading! Your comments and questions are welcomed below.

In Pennsylvania, at least one county will be giving property owners a little more time to file their property tax payments before establishing liens and starting the process that ultimately leads to a tax sale in an effort to keep more people in their homes[1]. Like many areas around the country, Allegheny county is experiencing a potential budget problem, due in part to the fact that the number of people neglecting their property taxes is spiking dramatically. The tax controller believes that delayed filings have improved that number before and hopes that it will do so again. People who are unable to pay in full will also be able to opt into a payment plan.

As a tax lien investor, do you think that these delays – which are becoming more and more common – are reasonable or are similar last-ditch efforts interfering with your investing process?

Thank you for reading! Your comments and questions are welcomed below.

The mailing of nearly 115,000 personal property tax bills in Arlington County in Virginia has been delayed by at least ten days, thanks to defects on the forms themselves[1]. Since tax bills cannot be assessed late penalties or other regulatory processes unless the bills have gone out no later than 30 days before the deadline, the deadline will be extended for the entire area. No penalties of any sort will be assessed to bills received by October 15. Usually the deadline is October 5.

While this will not likely have a major impact on tax lien investing in this area since properties do not immediately enter auction in Virginia, it does give taxpayers a little additional time to get their payments together. The defect has been attributed to an error on the part of the printer, Graphic Communications.

Thank you for reading! Your comments and questions are welcomed below.

Tax lien investors could stand to take a lesson from a near-miss in Schenectady, New York. The city, which recently had to add another $4 million to a $21 million project to rebuild public works buildings on abandoned, tax lien property taken over by the city council, found that not only was the project running way over budget thanks to unexpected and unavoidable soil cleanup efforts, but that the city might not even have the deed to the land in the first place because the original owners never signed it over when they abandoned the property, leaving their property taxes unpaid[1].

This is an important step in the tax lien investing process that you must not overlook. In some cases, the foreclosure process will resolve the matter. However, you must make sure – particularly if you accept a deed-in-lieu – that your name is actually on the deed to the property when you take possession. Schenectady has resolved the issue without conflict, but this was lucky for the city council. Not everyone who neglects to get a deed quitclaimed will have such a smooth time locating the previous owner and removing the cloud on the title of the property.

What is the worst error you ever made as a tax lien investor?

Thank you for reading! Your comments and questions are welcomed below.

If you are perusing tax lien sale lists for retail properties as well as residential, then Pennsylvania could be a good place to start. Delinquent tax payer lists in this state include entities that have failed to pay cigarette taxes, with some parties owing as much as $46,000 including penalties and interest. Even more serious, however, are the liens accumulated by individuals who buy online, since once the product is shipped the recipient becomes responsible for the payment of the tax on the cigarettes[1]. Liens on businesses can impact that retail entity’s building, but it is unclear how individual taxes might be collected should they fall delinquent.

These tax payment are dedicated to the Children’s Health Insurance Program (CHIP) and the Agricultural Conservation Easement Purchase Fund to help preserve Pennsylvania farmland. Would you consider buying this type of lien in a tax sale? Should they even be included with tax liens at all?

Thank you for reading! Your comments and questions are welcomed below.