One can profit from foreclosed houses without buying the properties, but by buying the tax liens on the properties.
In Maricopa County, Arizona, tax lien buyers can earn up to 16 percent annually if they acquire good liens. Lenders typically pay up all the unpaid taxes on properties they foreclose upon, so lien holders can expect immediate returns on their lien investments.
Investing in real estate tax liens is ignored by some investors, but tax lien experts say returns from them are more dependable than other property investments.
Phoenix-based lawyer Mark Manoil, who has published a book on tax lien investing, said that prospective tax lien investors in Arizona can take advantage of the record numbers of tax liens being auctioned off. The decline in demand for liens enables investors to keep the final bid at ten percent.
In the tax-lien bidding process, investors bid for the best interest rate, starting from 16 percent and going down in increments of 1 percent, 2 percent or 3 percent or higher whole-digit increments. The interest rate goes down as the bid progresses.
According to data from the Maricopa County Treasurer’s Office, the average bid last year was 8.7 percent. This year, the level of opportunity for investors is likely to become the highest in years as record numbers of foreclosed houses and sharp declines in real estate values caused a sharp spike in unpaid real estate taxes in 2008. These tax liens will be sold off to investors in an auction in February.
Charles Hoskins, treasurer of Maricopa County, said that the value and number of unpaid real estate tax liens always increase sharply during downturns. He added that the lien sale in February will be the biggest in value and number for the county, but the highest rate of tax delinquency occurred in 1990 when four percent of total tax levies were unpaid and auctioned off in the 1992 lien auction.
The tax liens to be sold off in the February 2010 auction represent the largest volume ever recorded in Maricopa, with about $70 million in unpaid taxes on around 42,000 houses and properties. They also mark a substantial increase from the sale of liens worth $47.5 million on about 33,500 properties in 2009.
According to tax lien experts, investors should do their research on the liens, especially liens involving foreclosed houses. They said that some properties could be deemed environmental hazards or could be sold off at a price not enough to pay the tax liens.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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