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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If you want to have a lot of options at a tax lien sale, then Binghamton, New York, is probably not the town for you. According to a recent report put together by Scott Snyder, the city’s tax assessor, total property tax exemptions are equal to 33.8 percent of the $1.8 billion assessed value in city property. As in most areas, churches, hospitals, non-profits, schools and government buildings are exempt from property taxes. Binghamton adds to this veterans, disabled citizens and low-income elderly[1]. This population makes up nearly 5 percent of the assessed value in the area.

The exemption report is raising hackles all over on both sides of the issue, but in reality, these numbers are not that unusual. In fact, Snyder says that Binghamton is “at or below the other levels I’ve seen [for other upstate cities serving as county seats,” while Teri Rennia, a democrat from the district, says that if these exemptions are removed then it will hurt the veterans and the elderly since the other exemptions are constitutionally-mandated.

Do you think that these exemptions are reasonable? Would you invest in tax liens in an area with these types of exemptions?

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

An Iowa man who allowed relatives to live in his Algona, Iowa home in return for paying taxes, insurance and maintenance on the property has successfully reclaimed the deed to his property following a lawsuit in which he claimed that notices that property taxes went unpaid were not effectively delivered[1]. The man, Charles Dearchs, who moved to California in 1991, learned in 2005 that a team of investors had purchased the deed to his property at a tax sale. He petitioned in 2008 to have the tax deed voided on the grounds that he had not been “properly served with his right to redeem.” He was denied, but appealed, and his appeal was granted in September 2010.

If you are a tax lien investor, you must remember that you are not only responsible for your own collections if you buy a lien instead of a tax deed, but you also may end up dealing with the local government’s failures to deliver information appropriately. Have you ever encountered this type of difficulty personally, or are there areas that you avoid because they are not known for effective handling of their liens?

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

When you first hear that a local Pennsylvania property tax lien sale netted over $400,000 this week, you might be thinking, “Wow, those properties sure were not very cheap.” However, nearly 800 properties were up for auction at the sale, and many bids were actually lone ones starting right at the amount of back taxes and penalties owed on each property[1]. One frequent tax bidder purchased 25 properties for a sum total of $178,744, while a first-timer bought a family cabin back for “sentimental reasons.”

Both residential and commercial properties were for sale, and many investors were there to “clean up the titles” of properties before the resale.

Would you buy a tax lien property for personal reasons, or stick only to business?

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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.