Friday, November 17, 2006

Tax Lien Sales Up In Colorado

The Denver Post reports on tax liens. "The number of homeowners and businesses falling behind on their property taxes in the metro area is on the rise. Adams, Arapahoe, Denver and Jefferson counties, in recently concluded auctions, sold 51 percent more property-tax liens to investors this year than last; 10,398 versus 6,879."

"The jump reflects several trends, including a sharp rise in mortgage foreclosures, and homebuilders unable to generate cash they need to cover taxes on their undeveloped lots. 'We are early on in the pain game,' Adams County Treasurer John Lefebvre said. 'How long can people hold on?'"

"But one person's pain can be another's gain. Tax-lien sales are designed to find investors willing to pay overdue property taxes needed to fund counties, school districts and other local governments. In return, investors have the potential to earn an enticing return, 15 percent this year, that the delinquent property owner must eventually pay."

"But there's a catch. When a lot of people bid on tax-lien certificates, a premium is often required, typically 5 percent to 8 percent of the lien amount. Someone who pays a 6-percent premium for a tax lien that is paid off by the property owner in a month or two will lose money. And about two-thirds of liens get paid off within a year."

"Arapahoe County limited attendance at its tax auction Wednesday to 250, with 50 more people waiting to grab empty seats as people left, said Jan Neilson, deputy treasurer. Close to 300 people registered to bid on more than 3,000 tax liens in Adams County, compared with 178 people last year."

"Veteran investors, who years ago faced almost no competition, must now bid against corporations, nationwide investment pools and wealthy out-of-staters. That means higher premiums for counties, and premiums are pure gravy."

"Jefferson County, for example, collected $449,000 in premiums from its online tax-lien auction, deputy treasurer Dave Vil lano said."

"A common myth promoted at some real-estate seminars is that tax liens are an easy path to acquiring properties on the cheap. That almost never happens, treasurers said. Even in a foreclosure, mortgage lenders will step in to make good on the tax lien rather than have an investor cut them out."

"Property owners are allowed to go three years on a tax lien before a lien holder can apply for a deed to the property. When owners don't cover a lien, it is usually because the land is worthless."

"But lien buyer Hans Pieren from Greeley, said the returns are hard to beat, especially if a lien doesn't get paid off for two or three years. 'You are lucky if you can get 15 percent in the stock market,' he said."


At 12:01 PM, Anonymous Anonymous said...

Take a look at my market history report for Bakersfield and Los Angeles at

At 4:13 PM, Blogger Dohboy said...

Increase in tax lien sales is directly linked to higher interest rates and higher mortgage turnovers. Additionally, a new breed of investors are coming out with books like Investing Without Losing: The Beginner's Guide to Real Estate Tax Lien and Tax Deed Auctions (ISBN: 0978834607) to guide them.

At 9:12 AM, Blogger Loren said...

Just like everything else, price matters. Novice and ignorant "investors" are pouring so much money into nearly every market that there are few good investments anymore. The flood of credit coming from the Fed is driving the profit out of everthing.

It really is different this time, and I'm not quite sure why, but inflation is not showing up in consumer prices like traditional theory predicts it should.


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