Seeking Info on Tax Lien Certificates (TLCs) and Tax Sales
I am interested in hearing from anyone who has knowledge about or who
has participated in Tax Lien Certificates (TLCs) and Tax Sales.
For those who are completely lost on what the above means, it involves
paying the overdue county property tax liability on behalf of the
property owner unable to make payment themself. In return for putting up
the cash yourself, you earn interest for some period of time, at which
time the property owner must either pay the overdue tax and interest, or
you have the right to foreclosure.
Here in Maryland, the auctions only happen 1x per year, and this is the
time of year when they happen. They are staggered out by county over a
period of about three months. The time to foreclosure requirement for
holders of Tax Lien Certificates in Maryland is 6 months. The interest
paid is 12%, which appears low by national standards.
The next sale is this Thursday, May 18, 1995 for Baltimore County. The
listing indicates there are somewhere around 2,000 properties. The
owners of those properties have until Thursday morning to pay the tax,
so the 2,000 number will fall off somewhat, but it still appears there
will be many for sale.
This afternoon I looked at several properties, and two were particularly
interesting. The outstanding tax obligations were about $1,600 each.
So half a year's interest on $3,200 @12% is only $192, hardly worth the
effort of attending.
The excitement comes from the possibility of being able to own the
property through foreclosure. Although the two houses noted were
sufficiently nice that it seems unlikely you'd get either one,
(I.E. it seems likely that the tax obligation would be paid and
you'd get only the interest) there were also a couple of abandoned
houses in good residential neighborhoods. These houses were completely
overgrown and needed tons of repair. I figure it would be simpler to
just bulldoze it and put up a new modular home, then sell the new home.
Because the neighborhoods were older, I assume it wouldn't be much of a
problem to get the necessary permits to do what it takes to get the new
home erected.
So that's the scenario. I'm sure I left out a few details, but I'd be
most appreciative to hear from anyone with additional information.
Although I have not actually purchased any myself (but would like to), I
understand that you could not hold a superior lien position to certain
other liens i.e. federal tax liens, sewer or water liens, or tax liens
purchased before yours. Which might make your foreclosure more expensive
to complete. In New Jersey, I think the interest rate on the
certificate is bid on, so then the lowest rate wins the bid, but there's
usually enough to go around so that not much bidding goes on -- the
maximum rate is 18% !!!
Again, since I've never done this, maybe someone knows of an
authoritative source of information on the subject. I would appreciate
direct E-mail since I don't read this group regularly.