Thanks for the comments Bill. Personally, I do like to know the details of whatever topic I am jumping in to. So while I don’t plan on doing tax liens in the near future, I’ve already read most of the AZ tax lien statutes, and some of the MI tax lien legislation. To me, it looks to be a relatively straightforward process. You just need to research the property correctly to ensure that the property can sufficiently support the tax lien. If it turns out to be a $5k tax lien on a 10 foot x 10 foot parcel with a light pole on it … well, that’s not so good.
Tax lien sales are normal routes to good interest and penalties…not the purchase of property.
If you buy a tax lien you are making a loan to the taxing authority as payment for the delinquent taxes. You will have to wait a certain amount of time before the redemption period expires and then it may be deeded to you or you may have to initiate foreclosure to get the deed.
My experience has shown that about 98 percent of the taxes will be paid prior to the expiration of the redemption period. If the mortgagor does not pay then the mortagagee will step in and protect their position.
Do good things happen…yes, occasionally you will get a decent piece of property for pennies on the dollar…however my expreience has not been anywhere close to the infomercials…they are in the business of selling information. Read the small print on each one and it will say something like, “Unique results …yours will vary.”
On the other hand if you are buying in a tax deed state or at a tax resale sale…then you get a deed to the property right then…when the auctioneer says SOLD…it is yours warts and all.
Be extremely careful of what you bid on…most of it is sold for very high prices now-a-days and lots of it is not worth the effort.
We control many proprties in Baltimore using a tax sale system we created. We actually work on tax sale properties almost daily. Recently we controlled one for $13,000 and assigned it for $64,000.
There are more than one way to enter the chain of title where control is possible.
Study the system in your county and you can find the some unique ways to profit from it.
Michigan used to give very good interest. I think it was in the 12% to 16% range the first year. Then it jumped up to 50% the second year! But I believe they’ve changed that now and only do tax deeds or something (they might have accelerated the process to get a tax deed).
I believe Ron Starr does tax deeds. He claims to have gotten some pretty good deals (pennies or dimes on the dollar). And I also get the impression that while insane deals like those are not all over the place, very good deals are (50 cents on the dollar).
Not sure if we are on the same page, Charles. I buy only tax liens. Are you speaking of tax deeds? If that is the case, then yes, there are indeed lots of ways to get into the action.
Yes, Ron buys those run down $2,000 termite palaces in OK and rents them. I cannot bring myself to be a slumlord, nor could I ever bring myself to rent something to someone that I could not live in myself.
Having been in this business for quite some time I can tell you that you are pipe dreaming or smoking something that you should share will all of us if you think you can get all those good deals that you see on the infomercials.
Now a days the business is just like the rest of the industry…dog-eat-dog.
I recently at one sale bought 503 parcels…of that amount three matured to me…two were absolutely unusable and the other was a street that should not have been in the sale at all. I let the two go to the next sale and they paid me off to get the street back.
Bill what do you mean by buying 503 parcels that matured to 3? Are you talking tax liens? As far as I understand, when you buy a tax deed the deal is done and you own the parcel. So I’m a bit confused as to what you mean.
Also, do you have first hand accout of what Ron buys? I don’t, but from the ARVs he talked about, I was under the assumption they were in the $50k to $75k range. I know a guy that works the OKC market and a $50k to $75k house is a nice middle class place around the OKC metro area.
I have no experience in tax liens or tax deeds, but I’ve looked at the process and the listings in a couple areas. Judging from the outside, I would imagine there are deals to be had for a couple reasons:
The process is somewhat more complicated than just buying a bargain off the MLS.
The tax deeds are offered infrequently (every couple years or each year) so unless you follow the process, you could easily miss the nearest tax sale.
When the tax deeds are offered, they are all lumped together in one big sale. So doing your homework ahead of time and being prepared are very important.
So this leads me to believe that the people who do target tax deeds are usually the serious investors, not casual investors. Which in turn should mean less competition and better deals.
And people who live in the slums still need a place to live, right?
Ron Starr actually does live in the Bay area (over by Oakland I believe). But I don’t think he picks up deals in the Bay area anymore. His comments were that the tax lien and tax deed sales were too competitive, and the deals were not good. I know he does tax deed deals over in Oklahoma now, I’m not sure where else. He actually did a little class (2 of them - 1 on the coming foreclosure market in CA, and 1 on tax liens) at the Learning Annex back in May. I don’t know if he is planning on doing more.
Bill what do you mean by buying 503 parcels that matured to 3? Are you talking tax liens?..YES the original post was about tax liens…not tax deeds.
As far as I understand, when you buy a tax deed the deal is done and you own the parcel…If you buy at the tax deed sale in TX then you get a deed SUBJECT TO the right of redemption…which can be either 6 or 24 months…so the deal is NOT always done…however if you buy in CA…it is yours when the hammer falls. NO right of redemption.
Also, do you have first hand accout of what Ron buys? Ask him he will tell you…he buys at the OK tax resales and buys only cheap property that has matured to the county. Nothing wrong with that…just not the way I chose to do business. I do not think he owns anything in OKC, Tulsa, etc…only out in the hinterlands of Frederick etc.
I have no experience in tax liens or tax deeds, but I’ve looked at the process and the listings in a couple areas. Judging from the outside, I would imagine there are deals to be had for a couple reasons:
The process is somewhat more complicated than just buying a bargain off the MLS…INDEED IT IS!!!
The tax deeds are offered infrequently (every couple years or each year) so unless you follow the process, you could easily miss the nearest tax sale…Have not found this to be the case…the government only gets $$$ from the taxes it collects and they are all strapped for $$$ so most sell at least annually…in TX it is MONTHLY.
When the tax deeds are offered, they are all lumped together in one big sale…WHERE??..doing this would limit the number of buyers and limit the bidding…does not sound pratical to me. Last year the overbid was about $450,000 and no county I know of is going to pass up that amount of $$$ easily.
So this leads me to believe that the people who do target tax deeds are usually the serious investors, not casual investors. AGAIN YOU ARE CORRECT.
Which in turn should mean less competition and better deals…Unfortunately not so…we now have LARGE financial institutions entering the game…they buy for the 18 percent interest…package them as CD’s for 4 to 5 percent and sell to their depositors…making $$$ on both ends of the deal.
And people who live in the slums still need a place to live, right? YES, BUT NOT in my SLUMS.
Tax lien or tax certificate or tax deed investing is and can be a very interesting business…be sure of which one you are investing in…learn all you can prior to putting your $$$ at risk and jump in …the water is FINE.
Bill, the tax lien sales in CA are every 2 years I believe. AZ is every 1 year. I think MI might be every 2 years. I never knew TX was every month. That would give you more chances to learn the process when you are starting out.
I believe the tax deed sales also run on the same schedule as the tax lien sales in those states (for the liens that revert back to the county).
When I said the sales were all lumped together, what I meant was that all the sales occured at the same time, not that they were sold in group packages. For example, Pima county in AZ holds their sale once a year. But when you go to the sale, there are over 10,000 liens to bid on. So it’s quite a lot of stuff to sift through to get what you want.
Also, what do you mean by overbid? I know there’s a couple different ways to bid on tax liens … bid the interest down, or the price up. So are you saying the overbid is bidding the price up beyond the outstanding value of the tax lien? It’s hard to tell if $450k is a lot of overbid … on what quantity or value of liens is this overbid?
I have and still do buy tax leins in Florida. A good sourch of education on leins is availble at taxsalelist.com They have guide books for most states and will even email you alerts as to up comming internet bids.
I think if you will check you will find the vast majority of the states conduct at least annual sales. They do not have the luxury of having excess funds in the treasury and so must sell as quickly as possible to keep the local governments afloat.
Tax deed sales in tax lien states…can only be held if there were tax liens that did not sell at the lien auction…and…can only be held after the redemption period expires.
Yes, AZ has a bunch of them…last time I looked Maricopa County has about 23,000 as I recall…and lots of them did not sell.
Tax liens are commonly sold on either a bid the interest down like in FL or bid the taxes up like in MS. If you bid the interest down you get nothing and are hoping to get the property. If you bid the taxes up you are overbidding and the taxing authority gets the overbid…commonly they do not refund it nor do they pay interest or penalties on it.
$450K is only a fair amount of overbid…the sale that year was for almost $9,000,000.00…at that sale there were a lot of people who were sure they were bidding for the property…ill informed and unaware that they were making a HUGE mistake…oh well, live and learn.
PLUS this busines has gotten so competetive that if you are going to do any business at all you will have to overbid…or bid the interest down as far as the laws will allow…it is no longer a gentleman’s game. It is just like the trustee sales…lots of guys and gals get the feeling that “The boat is leaving and I’m not on it” and bid like wild.
ALSO remember as I said that lots of financial institutions are now entering this market…they can overbid by say 8 percent…still get 10 percent and sell the CD’s to their depositors for 5 percent and make money on both ends.
This is a business that I STRONGLY advise that you get all the education about it you can…do not simply go down and bid…go to your local courthouse law library and ask the librarian to assist you and get copies of all the statues on tax lien or tax deed sales for your state…Investigate BEFORE you invest.
