In all 67 Alabama counties, property taxes are due October 1 and become delinquent on January 1 the following year. Once property taxes become delinquent for a property, a tax lien is placed on the property until the taxes are paid in full by the property owner. All Alabama tax lien sales take place in late April or early May. In Jefferson County alone, Alabama's largest county, over 4000 tax lien certificates worth over million are sold. In the State of Alabama, the guaranteed interest earned on a tax lien certificate is 12 percent per annum, starting the day of the tax lien sale.
Generally, the tax lien sales are held on the county courthouse steps and the premium bidding method is used. In a premium bidding method, each property is started at the minimum bid, which is usually the sum of property taxes, the accumulated interest on those taxes, and any sale administrative fees, such as advertising the tax lien on the property in the local newspaper. Starting at the minimum bid, investors take turns bidding up the tax lien certificates until there is only one investor remaining who is willing to pay the highest "premium" on the tax lien certificate. Most Alabama county tax auctions start on a Monday and they will continue on consecutive days until all land parcels have been publicly offered.
County Property Tax
The purchaser of a tax lien certificate has the right, but not the obligation, to pay subsequent property taxes on the property each October 1. If the investor allows the subsequent taxes on the property to become delinquent, the tax lien certificate (in the amount of that year's taxes) will be offered again in the April or May sale. If the purchaser holds on to the tax lien certificate, pays all subsequent property taxes for a full three years following the initial tax sale, and the property owner (or other interested party) does not redeem the property (pay all accumulated taxes), the tax lien certificate holder has a right to the tax deed on the property.
All tax lien certificates that did not receive any bids at a county tax sale are assigned to the State of Alabama. These tax lien certificates are often referred to as Over-the-Counter (OTC) or Assignment Purchasing liens. The same "redemption period" is used for these tax lien certificates, which means any tax lien certificates that have been in State inventory for over three years will be offered as tax deeds. Both tax liens and tax deeds in Alabama's state inventory are available for purchase by any private investor. For an OTC tax lien/tax deed list from every Alabama county, go to the Alabama Department of Revenue Property Tax page.
An investor must submit an application to the State for each property for which they have an interest. An investor may submit as many as 20 applications. Instructions and application forms are on the page referenced above. The lists are updated at least once a week. Like any investment, it is important that any investor does their research and due diligence on each property. If a land parcel stays in the State's inventory for more than five years, it is a possibility that an investor can obtain the tax deed to this property for less than the amount of taxes due.
Unlike some other lien states in the United States, tax lien certificates convert into tax deeds after the three-year redemption period without the tax lien certificate holder having to start the foreclosure process on the property. Instead, this tax deed received pursuant to the Alabama process is the result of an administrative foreclosure and does not guarantee a marketable title. So, a quiet title action may be required to gain an insurable title.
To give you an idea of some counties you may want to invest in, I will give you the five most populated Alabama counties below: Jefferson County - 656,700 Mobile County - 404,157 Madison - 304,307 Montgomery - 223, 571 Shelby - 178,182
There is definitely a lot of opportunity when it comes to tax lien and tax deed investing in Alabama.
Investing in Alabama Tax Liens and Tax Deeds
No comments:
Post a Comment