Greeves & Roethler, PLC offers a full range of legal services concerning tax lien foreclosure actions. We represent both creditors and debtors regarding tax liens. Please call (480) 422-1850 for help concerning your tax liens.
Securing a tax lien against real estate for which the taxes remain unpaid is a high priority for investors. Because of this, in addition to the rate of return being between 16 and 18 percent interest, investing in most tax lien certificates can be rewarding and lucrative.
The way to invest in a tax lien is to attend the Certificate of Purchase also known as a real property tax lien, or tax lien for short, at the auction that is held in February of each year.
A tax lien is purchased from the County by paying the total of the back taxes along with 16% on that amount plus a few dollars in purchase fees. This is called an assignment to an individual, no matter if it is a corporation or an actual person.
A quick clarifying point — A real property tax lien is a delinquent real property tax as assessed by the county in which it resides. It comes into existence automatically by operation of statute. This delinquent property tax is allowed two years to pay in full prior to being put up to auction as mentioned above. Once you own a tax lien, you must wait for a period of three years after the tax lien was opened to purchase by the public. Once this three year period expires, it is possible to foreclose on the tax lien.
The only way to eliminate a tax lien is to either, pay it in full, or to foreclose on the lien through a judicial foreclosure. No other way exists to eliminate the lien.
To foreclose on a tax lien requires a judicial foreclosure. This is abnormal for most of the states in the West. Most foreclosures you hear about on the news, particularly in Arizona, are conducted by what is known as a Trustee’s Sale. In this process, there is no need to go to court in order to foreclose on a property. However, in many states, such as Florida, a judicial foreclosure is necessary in order to foreclose on a property. This makes the foreclosure process longer, more complicated and shifts the burden to the party attempting to foreclose to prove they have the right to foreclose on the property.
The redemption can occur anytime within the 3 year period. However, there is an additional 16% interest that must also be paid with the redemption in order to prevent a foreclosure. If the redeeming party has already been served, the redeeming party still pays the back taxes and us. The tax lien holder, pays nothing for the lawsuit and receives his or her investment back plus interest.
In the event the property is not redeemed, then the tax lien holder pays the costs and attorney’s fees which have been incurred.
Costs generally run between $1,200 and $3,000 dollars for the foreclosure process.
The only risks that we have been able to ascertain in this area of law are:
- (1) that the property value is less than total cost of back taxes and the costs of obtaining a deed;
- (2) a bankruptcy proceeding by a party with an interest in the property, this is not that risky as, in a bankruptcy, the 16% will be paid. However, the attorney’s fees will not be paid if they are already accrued, and;
- (3) another interest presents after filing the lawsuit and is not named or served and ultimately redeems the back taxes. The former can be minimized by judicious selection of the parcels purchased, and the latter is more of a risk to the attorneys as the debt for the costs and attorneys fees is generally the one that is discharged
.
