Investing In Tax Lien Certificates

Treasurer Brigitte C. Grimm

Presentation prepared by John Lefebvre Adams County 4430 S Adams County Parkway Brighton, CO 80601 (720) 523-6160 www.adcogov.org

Purpose

 Dispel myths  Present risks  Describe the opportunity

Treasurer’s Duties

The Treasurer collects taxes, disburses funds to the underlying districts and invests the difference.

• Approximately 200 active underlying tax districts, as well as the county, depend on full tax collection each year.

Selling tax liens helps meet that goal

Key Terms Defined

Ad Valorem

Means “according to value” describes any tax based on the value of the item. Property taxes are an ad valorem tax.

Abatement

A procedure where the assessor finds an error in a previous assessment or a property’s value, and adjusts it accordingly. Overpayments resulting from errors are refunded.

Actual Value

The appraised market value as determined by the County Assessor

.

Key Terms Defined

Assessed Value

The actual property value multiplied by the assessed rate. The residential rate is 7.96% The nonresidential rate is 29%

Endorsement

The option extended to the previous year’s tax lien certificate holder to buy the current year’s lien on the same property without paying a premium.

Mill Levy

One mill is one one-thousandth of assessed value.

Key Terms Defined

Premium

The amount bid at sale over and above the tax lien. This amount is not returned nor does it earn interest.

Quiet Title Suit

Establishes the title to land by bringing into court an adversary claimant and compelling them either to establish their claim or forever after stop asserting it.

Redemption

The owner pays the delinquent taxes plus fees and interest. The tax lien certificate buyer is paid the amount of the lien plus accrued interest upon surrender of the tax lien certificate

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Key Terms Defined

Safekeeping

The Treasurer maintains the buyers certificate. Upon redemption the buyer is automatically mailed a check and a Certificate of Redemption.

Strike To The County

Tax liens that do not receive bids at the auction are “struck to the county.” They can be purchased at any time after the tax lien sale.

DON’T BUY THESE LIENS UNLESS YOU KNOW WHAT YOU ARE PURCHASING

Key Terms Defined

Special Improvement District

Special Improvement Districts (SIDs) are formed by communities with the power to lay special assessments on property for the construction of certain infrastructures which benefit those properties. More loosely, the term is used to refer to other types of districts which have the power to lay either ad valorem taxes, sales taxes or special assessments.

Tax Lien Certificate

The document certifying the buyer of a tax lien from the County Treasurer, and the right to any payment against the delinquent property taxes.

The Process

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Understand tax liens

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Research properties

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Register as a buyer

According to the county treasurers I interviewed, 98% of all tax lien certificates are paid off by the property owner within two years. What if the property owner doesn't pay the taxes and redeem the certificate???

This could be your change to win the lottery!! If the property owner doesn’t pay the taxes, then your attorney, with the help of the county government, can perform a foreclosure. You'll own the property for only the taxes, and a This Is The Perfect Investment

clear

EXPECT TO DOUBLE YOUR MONEY

This little known armored care safe investment pays two to three times what you can earn on T-Bills or CDs and more than twice what you earn on other government bonds. If your CDs are making 6% it will take 12 years to double your money. If you owned government sponsored Tax lien certificates yielding 18% you could double your money in four years or less.

UNBELIEVABLE YIELDS! WHAT THE BROKERAGE HOUSES ARE TERRIFIED YOU'LL DISCOVER… TAX LIENS WILL PAY YOU…

New Jersey, 18%. City of Baltimore, 24%. Florida, 18%. Michigan (year one), 15%. Arizona, 16%. Michigan, (year two) 50%. Iowa, 24%. Cook County, Illinois auctions 100,000 certificates every year. You can buy small certificates at $500 or spend $10,000, it's up to you.

This program is brand new and there is nothing else like it! Guidebook, National Directory, software - Cash Flow interest rate, manual and software - and 7 separate videos of the auctions, plus access to our new, exclusive TAXSALE.COM Internet site and Tax Lien Strategies Newsletter.

FOR YOU…

To duplicate the airfares, hotels and expenses to visit the auctions would cost well over $10,000. The manuals are professionally produced. Every page of the guidebooks were designed for easy understanding and readability. A professional computer graphic designer developed each page.

Thousands of hours were spent developing this comprehensive program, all to teach you on e of the most exciting investment opportunities I have ever seen. Adding together the research, editing, cover designs professional graphics Pennies on almost $100,000 and that doesn't count my time. I have invested more than 2,000 hours of my time to learn how to the dollar If you see what a fantastic investment opportunity this is and recognize how small, inexpensive $842 investment could change your future, then call me today for a risk free trial.

My guarantee is simple. If you don’t think you'll make 10 times the cost of the course in the first year you own the program, that's $2970, simply send it back.

If it sounds too good to be true it usually is!

Tax liens can be good investments. This presentation acquaints you with the process in Colorado and helps you make an informed decisions before you invest.

Tax Liens

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What are they?

They are liens placed against real property for the amount of unpaid taxes.

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Is this a way to acquire real estate?

No. We do issue roughly 4 to 6 deeds each year on unimproved property.

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Is this a way to get rich quick?

No. Be careful of misleading information.

Why Would Someone Let Property Go To Tax Sale?

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Land developers use it as a line of credit

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Undesirable property that people don’t want to retain

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Inability to pay the taxes Miscommunication on who is to pay the taxes

Property Tax Timeline

Taxes are collected in arrears

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January – Tax bills are mailed.

February First half taxes are due the last day of the month - if paying in installments.

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April 30 Full payment due.

June 15 Second half of taxes are due.

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June 16 All unpaid taxes are delinquent.

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July Delinquent properties are sent tax notices.

Property Tax Timeline

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September-October - All delinquent real properties are advertised in a local paper for purchase at the tax lien sale.

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Prior to the second Monday in December - All delinquent real property tax liens in Colorado are sold to investors at annual tax lien sales. This is the final effort to collect taxes due for each tax authority.

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Adams County tax liens are advertised for sale in October and they are available on our web site. The tax lien sale is generally held in November over the internet at https://adams.coloradotaxsale.com/

Tax Sale Certificates

Tax Sale Year Certificates Sold Dollars Sold Coupon Rate

2005 2006 2007 2008 2009 2010 2011 2012 2013 3021 2847 3270 2808 3742 3363 4475 3071 2398 $4,686,295 $4,968,930 $4,436,248 $5,227,628 $5,876,594 $5,958,374 $4,4713,912 $3,601,289 $2,925,813 15% 15% 11% 10% 10% 10% 10% 10% 10%

Redeeming Certificates

How are certificates redeemed?

Property owners pay the delinquent taxes and interest due to the Treasurer.

The tax lien certificate may be redeemed at any time until a Treasurer’s deed is issued.

Rate of Redemption

for certificates sold at tax sale 1 Month 3 Months 6 Months 12 Months 24 Months 36 Months 48 Months 7% 22% 38% 64% 80% 90% 96% Within 12 months over half of the certificates are redeemed.

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1 in 5 certificates are redeemed after just 3 months. - Depending on your bid and , you could LOSE money!

Premiums

Premium is t he amount bid at the sale over and above the tax lien. Premiums are not returned nor do they earn interest.

Premiums - How much to bid?

Calculate the premium you are willing to pay before the sale. Know when to stop.

Return on a $1,000

Based on a 12% yearly coupon rate

Tax Lien

Redemption (Maturity)

Premium

1 Month 6 Months 1 Year 10%-$100 5%-$50

($90) ($40) ($40) $10 $20 $70

2%-$20

($10) $40 $100

Rate of Return

How is the interest rate determined?

• The 2014 interest rate is 10% per annum. It is set on September 1 st . It is set 9 points above the federal discount rate.

Is it constant?

• Yes - through the life of the tax lien certificate.

Endorsements

Is the option extended to the previous year’s tax lien certificate holder to buy the current year’s lien on the same property prior to the tax lien sale.

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Advantage of Endorsements

No need to pay a premium.

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Draws interest from endorsement date (August) rather than from tax sale in November.

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If discount rate drops, endorsing locks in higher rate from the earlier tax sale.

When to apply

Deeding

A Treasurer’s Deed cannot be issued until after a minimum of three years from the date of the original tax sale.

Often, lien holders apply for deeds in September (prior to the three-year point in November) after they endorse the third year.

The deed process takes approximately 6 months.

Costs Associated with Deeds

Deed Costs - $400

- Any remaining balance (usually small) is refunded.

Included in the $400 Deed Cost:

- Treasurer’s fee of $75 - Owners & Encumbrances (reports follow chain of title) - Certified Notice to Parties -Plus advertising

Possible Additional Costs with Deeds

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Costs not included that could be incurred to obtain a good title - Survey - Quiet Title - secures a clear title

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A Treasurer’s deed is NOT a warranty deed and can be contested

Deeding

Priority of the Treasurer’s Deeds

A Treasurer’s deed is superior to encumbrances such as: • Mortgage Lenders • Judgement Creditors • Mechanic Liens

Tax Lien Certificate Lien Holder Standings

See “Priority of Tax Liens” in your handout.

Deed Process Timeline

November 2014 -- Buy Tax Lien Certificate August 2015 -- Endorse Certificate August 2016 -- Endorse Certificate August 2017 -- Endorse Certificate September 2017 -- Apply for Treasurers Deed January 2018 -- Receive Treasurers Deed

Investigate properties before investing!

Property Information

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Tax Lien Sale List on internet site of https://adams.coloradotaxsale.com

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Web Site www.adcogov.org

www.adcotax.com

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Assessor’s Office

Possible Problems

Contamination

Possible Problems

Minerals

Possible Problems

Special Improvement Districts

Possible Problems

Strips

Possible Problems

•

Property Value Inaccuracies

Lot 7 although equal in size to other lots in the subdivision, consists of a drainage ditch and is unbuildable.

Registering as a Tax Buyer



Who can register?



Anyone except Adams County employees and their immediate families



Register online at the internet site of https://adams.coloradotaxsale.com

. Registration is open October 8, 2014



W-9 form done automatically online



Tax Sale on closes November 3, 2014

The Auction

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The Treasurer has discretionary power in conducting the sale

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Sales are FINAL! Know what you are buying remember “Buyer Beware”

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Purchases must be paid for at the end of the sale

The Physical Auction

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Tax liens are sold in property schedule number order to the highest bidder.

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The amount bid is OVER and above the tax lien and applicable fees. It is called a premium and is nonrefundable and does not earn interest

.

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Determine the maximum premium you are prepared to pay prior to bidding.

Important Considerations

This is not a way to obtain real estate

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Tax liens are not a liquid asset, your money will be tied up for an unspecified amount of time

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Early redemption may result in a loss on your investment

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There is no guarantee it will be paid

Conclusion

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Tax Liens should be considered an investment You are buying the tax lien and not the property.

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Watch Out for the Pitfalls Severed Minerals, S.I.D., Strips, and Outlots

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Know what you are buying Buy in a familiar location and investigate beforehand

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Same Buyers Year After Year Many of the same buyers coming back year after year, so there must be something to this.

2014 Tax Lien Sale

An internet tax lien sale at https://adams.coloradotaxsale.com

, will open for registration, deposit and bidding October 8 and close November 3, 2014