If you buy tax liens with the aim of foreclosing on the property and taking it over for a minimal investment, then you might want to steer clear of Steamboat Springs, Colorado. While the county (Routt) anticipates selling off about 300 properties and recouping about $1.3 million delinquent property taxes, the area’s chief deputy treasurer Lila Stucker says that in Routt county, about 99.96 percent of property owners ultimately pay up[1]. Not only does Stucker expect that the number of properties for sale will decline by the actual November 4 sale, but she adds that a number of owners of the properties, already published in the local paper, have called to let the county know that the check is in the mail.

One longtime local tax lien bidder says that “It’s extremely rare that anybody actually goes to deed,” partly because the parties have another three years to pay off the tax bill. As a result, that bidder said, you should not bid down the interest because that interest is where you are going to make your money if you buy tax liens in Steamboat Springs.

Does this demographic sound appealing to you, or are you just in it for the deeds?

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Yesterday, we reported on a new development in tax lien investing in which large lenders, including Bank of America, and private hedge funds participate on a large scale in tax lien auctions, buying up hundreds of properties at these auctions and either collecting the debts – along with legally allowable fees and interest – or foreclosing on the properties. Not surprisingly, it did not take long for a number of people to come down in harsh judgment on these tax lien buyers, perhaps because many of the banking entities like Bank of America received taxpayer-funded bailouts in the past few years and some see the purchase of tax liens as using taxpayer funds to “profit from homeowners having trouble paying their tax bills”[1]. A number of people jumped in to give their opinions, including a law professor who called the strategy “personally distasteful” and individuals who were angry that many of the properties purchased by BofA were “low-income” properties and those owned by nonprofit public interest groups.

While it may not have been strategically wise from a PR standpoint for BofA to buy liens on wildlife rescue group shelters, Salvation Army shelters or preschools, the real issue seems to be the “sneakiness” of the process. Bank of America, Fannie Mae and JP Morgan all invest funds in tax lien properties, but usually under colorfully-named aliases with P.O. box business addresses that help maintain anonymity.

Do you think it is reasonable to criticize big banks that purchase tax liens? Should their doing so be publicly available information and should it be regulated?

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While Bank of America and other major lenders are facing serious problems with their foreclosure processes, they are always looking for new ways to expand. Many of the big lenders are in the process of moving into the tax lien collecting business[1]. Just as when private investors purchase property tax liens and property tax certificates, these big corporations are also able to levy fees and interest on the properties and even foreclose if the debt goes unpaid for long enough. In an economy where many real estate investing options are trickier than usual – and where lenders are losing big time as loans go delinquent – tax lien investing could be a bright spot for lenders just as it is for other real estate investors.

Are you buying more tax liens rather than doing other types of investing right now?

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While politicians all over the country are busy demanding a moratorium on foreclosures while affidavits and procedures are evaluated, there will be no moratorium for residents of Washington, D.C. who have failed to pay their property taxes[1]. Just two weeks ago, D.C.’s auction resulted in the collection of more than $11.2 million in tax revenue and tax lien investors began the process of trying to redeem their liens or foreclose on the property, which, in Washington, can take two to three years in some cases. In the most recent auction, 66 bidders participated and won their bids. Washington, D.C. uses a tax lien certificate process and requires a foreclosure before the bidder can take possession of the property.

Do you invest in D.C.? Are you concerned that foreclosure moratoria could impact your tax lien investing?

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A decrease in the volume of properties up for grabs at this year’s city tax foreclosure auction in Buffalo, New York indicates improving economic conditions, reports the local commissioner of assessment and taxation[1]. The number of people delinquent on property taxes and at risk to lose their properties is at a three-year low, indicating that the economic situations of many local residents have improved. The commissioner, Martin F. Kennedy, expects the list of 3,983 to shrink by as much as an additional third by the time the auction rolls around. This is far better than in 2008 and 2009 when over 5,000 properties were at risk this time of the year.

The city is providing lawyers to assist with the setup of payment plans and assistance and education sessions for homeowners and advocacy groups are in place to help the “elderly, disabled or disadvantaged.”

Have you noticed this trend at the tax lien auctions you attend?

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In Pennsylvania, the state is getting ready to try to embarrass citizens and businesses into paying their taxes. At the end of a 54-day amnesty period during which penalties and interest were waived on tax bills, the state is getting ready to roll-call those who are still delinquent[1]. This is the other half of the deal that the state Department of Revenue initiated with the amnesty period, during which $261 million were collected, although in one county, more than $1.8 million remained unpaid.

“We don’t like to go the embarrassment route, but these folks have left us no other option,” said Department of Revenue spokeswoman Elizabeth Brassell. She is hoping that businesses, in particular, will experience negative ramifications of having their delinquencies publicized and pay up rather than lose consumer traffic.

To some extent, this type of publicity has been going on in the tax lien arena for years, since properties that are delinquent are publicized and ultimately placed up for auction. Do you think that trying to embarrass people with delinquencies is appropriate? Does this method bother you?

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When eminent domain fails, try a tax lien auction. That is what the city of Springfield, Illinois, has learned after it purchased two boarded-up, decrepit, potentially-historic buildings at a tax auction. While the city is required to wait 30 days to demolish its new properties while historic value is researched and potential buyers are given the opportunity to save the properties from demolition, the city’s spokesman is speculating that in the ten years since receiving their “potentially historic” classification, the buildings have “deteriorated much more since then, and the value may be zero”[1].

The properties have been “problem properties” cited for everything from weeds to solid waste violations over the years. The city purchased them using Community Development Block Grant funds, which are distributed to HUD and can only be spent on “specific housing-related purposes.”

Do you think that it is reasonable for cities to purchase properties at auction using special funds?

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The FTC has shut radio advertise “American Tax Relief, LLC” down today, calling the operation a “scam.” Oddly enough, the California-based company had already lost its business license for not paying taxes[1]. The company advertised on radio, television and the internet, claiming the ability to negotiate lower payments on tax debts and even remove property tax liens from properties. If you are a tax lien investor, you likely encountered at least one homeowner that contributed to the more than $60 million alleged losses suffered, and it is possible that people still may believe that they are dealing with their tax lien issues on their properties through the company, which was raided in April and fully shut down today.

As a tax lien investor, do you think that “tax lien relief” programs can ever help?

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Patty Lovaas, a candidate for the Montana state legislature, is requesting the Missoula County halt a planned tax sale of 320 mobile homes whose owners are delinquent on property taxes. Lovaas claims that the most recent property appraisal of the homes was illegal, and that “there is a strong possibility that one of these lawsuits [against the appraisals] will prevail”[1]. Lovaas goes on to argue that the $4.8 million in uncollected property taxes and budget shortfalls in the area will not be resolved by the sale of the 320 mobile homes and that the displacement of the residents “will not solve the problem, but create new ones.”

The candidate seeks to stop the sale on grounds that the assessment of the properties was “irregular.” In Montana, if an assessment is deemed irregular then the property cannot qualify for sale via tax sale that year.

Do you think that this tax sale should be stopped?

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Tax officials In Clark County, Indiana may think twice before waiting nearly three years to have their next tax sale. The county’s recent tax sale recovered $3.96 million in unpaid taxes, but the county is still lacking about $1.9 million, reported county auditor Keith Groth, who was “pleased with the sale nonetheless”[1]. Only a little more than half of the properties sold at the tax auction, possibly because this auction was for the liens on the properties rather than the deeds to the properties themselves. Once the bidders purchase the lien, they have to wait a year to access the property, although they can charge fees and 10 percent interest if the homeowner opts to redeem the loan. That 10 percent increases to 15 percent after six months if the bidder is willing to take the minimum amount owed on the lien. Liens that are over-bid hold steady at 10 percent. The county may opt to offer unsold properties at a future date, but has not yet announced plans to do so.

Would you invest in a county with these restrictions on bidding and collecting on tax liens?

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