One of the most appealing aspects of investing in property tax liens is that they are quite secure – most are paid with interest, and the ones that are not are backed by property that can be foreclosed on with the full power and blessing of the law – the media constantly debates the ethics of this type of investment. As more and more professional tax lien investment companies enter the market due to the attractiveness of this type of investment in today’s market, the issue becomes increasingly volatile. Homeowners insist that the interest rates and foreclosures are “unfair,” while county tax commissioners cite their cities’ need for funding and the homeowners’ ultimate responsibility to pay their property taxes or face foreclosure.

Perhaps the issue is particularly starkly portrayed in Atlanta, Georgia. Many Georgia counties do not sell tax liens because they believe that “putting the process in private hands flips the creditor’s incentive at the property owner’s expense” and “is an abdication of a county’s tax collection responsibility”[1]. However, proponents of the process say that it lowers counties collection costs and generates efficient, quick revenue essential to the public works of any city or county. As a result of these stark differences of opinion – particularly when it comes to the ethics of tax sales, many tax lien foreclosures face hot debate and widely divergent media coverage in the state. For example: one woman who had her property reassessed several years ago and ultimately owed $220 more on her tax bill than she paid now faces over $8,000 in charges, “a profit of 2700 percent” for the investors foreclosing on her rental property. She claims that she never was notified of the debt owed and that her mortgage company did not know about it either. The tax commissioner’s office who ultimately sold the lien claims to have gone “beyond its legal duty” in trying to notify her, and blames the mortgage holder for the failure in payment. Now, then entire case is in court, but the foreclosure is still on while the entire process gets trashed in the media.

Georgia’s association of tax officials has a negative view on the entire process, with the president stating that “while the tactic can benefit a county that has difficulty collecting taxes, it generally does not serve taxpayers and is an unpleasant experience.” Would you invest in tax liens in Georgia, or do you prefer “friendlier” states?

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

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[1] http://www.ajc.com/news/tax-lien-sales-shock-787746.html

In an effort to protect its local tax-indebted properties, the city of Huntington, West Virginia recently formed a land bank program under its Huntington Urban Renewal Authority (HURA). The land bank program is intended to keep local properties with unpaid taxes out of the hands of out-of-state landlords by purchasing unpaid tax liens if the owner fails to redeem the lien within 18 months of the original tax sale. The land bank will pay all past-due taxes as well as fines, the current year’s taxes and interest accrued, using a credit line from a local bank. In 2010, the authority purchased $430,786.55 worth of tax liens.

While the purchase of city tax liens by the city when it is Huntington itself that is owed money may be questionable, a bigger ethical issue has now come to light. City council members appear to be benefitting from the requirement that tax lien buyers be local should they wish to ultimately take possession of the property, and many are bidding the minimum on properties at tax sales and may even be using the new land bank program to drive competition away.

At this time, the issue is nothing more than a concern. No charges have been filed, and while some purchases have “set off a blinking light among constituents” according to the Huntington News, most people just want to hear an explanation. The land bank’s official goal is to take the tax liens it takes control of and ultimately, if they are not redeemed, “sell them to responsible owners for rehabilitation.”

Do you think that this is a good practice for the city?

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