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July 2010 |
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SUPER
INVESTING newsletter series |
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The Gateway to Hidden Tax Lien Treasures: Missouri Hello Rogue Investors, It’s been awhile since my last newsletter series so I am kicking off the latest breaking news in tax lien and tax deed investing. You may not know that Missouri is a hidden gem for tax lien investing. That’s because it is off the radar, located in the middle of the United States, in what some people call the fly over zone. Missouri has certain rules that make it a bit of a hassle, but these same rules keep the competition to a minimum. Interest is respectable at 10% and the redemption period is one of the best in the United States at only one year or less. Unfortunately, Missouri does not have an over-the-counter or Internet auction process. If you would like to experience a traditional tax lien auction, set your sights on Missouri. Remember, though, that you have to find a representative for the County sale you want to attend if you don't reside there. Now, here is a summary of Missouri tax sales. When are the tax lien sales held in Missouri? Tax sales are held on the fourth Monday in August at 10:00 AM in every county. How and when can I get the tax sale lists? First check online, on the County Tax Collector's website. You may have to call and find out what local paper publishes the list or when it will be available online or for pickup at the county. Don’t forget to check out our companion resources: www.missouritaxliencertificates.com or www.tax-lien-certificates.com. What is the interest rate? Earned interest is 10 percent per year on the minimum bid. No interest on the overbid. Subsequent taxes earn 8%. How long is the redemption period? Up to 1 year. During the sale, the properties are listed as 1st, 2nd, 3rd and 4th offerings, based on the length of time the property has been in delinquency. With 1st (one year delinquent) and 2nd (2 years delinquent) offerings, the owner has one year to redeem; with 3rd offerings (3 years delinquent), the owner has 90 days to redeem; and with 4th offerings (more than 3 years delinquent), the owner has 0 days to redeem. What are the bidder requirements? This is the complicated part that prevents many people from investing in Missouri. If you are a Missouri resident, at least 18 years of age, and you provide an affidavit attesting that you owe no delinquent property taxes, then you are eligible to bid. Non-Missouri residents have additional requirements. Non-residents must file with the Collector an agreement in writing consenting to the jurisdiction of the circuit court of the county in which the sale will occur, and also file with the Collector an appointment of some citizen of that county as the agent of the purchaser, and consent that service of process on that agent will give the court jurisdiction to try and determine any suit growing out of or connected with the sale for taxes. When do I have to register? In most counties, you will be required to register at least one week prior to the sale. How does the bidding process work? The minimum acceptable bid is the amount of taxes and sale expenses due for the property. Some counties will use the term “taxes or taxes owed” to start bidding. Otherwise the safest way to bid is to actually say the amount owed, such as $1,125. Bidding starts at the minimum bid and increases in increments determined by the Collector. The increment could be, for example, $100, so the next bid would have to be $1,225. There is no upper limit on the amount that can be bid, and the highest bidder wins. You also can skip increments as long as you bid more than enough. For example, you could bid $1,500 for your next increment to move the bidding along faster and possibly show how serious you are (i.e., a little intimidation). Tip: Listen carefully to the instructions given by the Tax Collector, attorney or other County representative. Some counties may allow 3rd or 4th offerings to sell for less than the taxes owed. In a sale last year I witnessed a bidder paying “taxes owed” at about $200, rather than a minimum bid of only $5. He overpaid $195 for no reason. In an auction your bid stands so there is no going back. When is payment due? Payment must be made immediately to the Collector. Most counties require one or more cashier’s checks or statement of funds available from a bank. Personal or business checks, or cash, are typically not allowed. Some counties accept credit cards, but charge a processing fee. If the bid amount is not paid, a penalty of 25% of the bid amount plus a prosecuting attorney's fee of $5 will be assessed against the bidder. Can I sell my tax lien certificate? Yes. The purchaser may assign ownership of the certificate of purchase by completing the assignment portion on the certificate and paying a nominal fee to the Collector. The certificate cannot be assigned to anyone owing delinquent taxes or who is a non-resident of Missouri unless the non-resident assignee of the purchaser first complies with the provisions of RSMO 140.190. The assignment must be notarized and presented to the Collector's Office to be recorded. How long does my certificate of purchase last? After two years from the tax sale date, the lien expires if a Collector’s deed has not been issued to the purchaser. In other words, you have a limited amount of time to apply for a deed after the redemption period. For most liens, you will wait out the one-year redemption period, then you have an additional year to foreclose and convert your lien to a deed. How do I foreclose on a tax lien that is not redeemed? The following is the general process for obtaining a Collector’s deed:
What type of deed will be issued? Collector’s deed. Property liens, with the possible exception of a federal tax lien, are extinguished once a collector's deed is issued assuming compliance with notification(s) to lienholder(s) is proven. How can I buy tax deeds in Missouri? Taxing jurisdictions that are referred to as first class charter counties may elect to conduct tax deed sales instead of tax lien sales. Three Missouri counties have charter governments: St. Louis County, Jackson County, and St. Charles County. Currently, only Jackson County and St. Louis City offer tax deed sales. Also, because 4th offerings at tax lien sales have a redemption period of 0 days, a Collector’s deed is immediately issued to the purchaser. So, in essence by purchasing a 4th offering, you are purchasing a deed. Special Note for buying tax deeds in Jackson County and St. Louis City: If the amount bid by the purchaser at the execution sale exceeds fifty percent of the appraised value of the property, the court will confirm the sale, and the sheriff will execute a deed for the property. If the amount bid is less than 50 percent of the appraised value, but the property is subject to other taxes, which are a lien superior to the lien of the taxes for which the judgment was rendered, and the combined amount of such prior liens and the amount bid by the purchaser exceeds fifty percent of the appraised value of the property, then the court will confirm the sale and the sheriff will execute a deed for the property. If the amount bid, together with prior tax liens, if any, is less than fifty percent of the appraised value of the property, the court may require the purchaser to increase his bid to an amount equal to fifty percent of the appraised value, and if the purchaser agrees to do so, and makes the additional payment, the sale will be approved by the court, and the sheriff will execute a deed for the property. Tip: Jackson County sells tax deeds (not tax liens) at two different sales. One sale is held in Independence, Missouri a week before the traditional sale in Kansas City, Missouri. You must register in advance and separately for each sale. Legal Challenge Period: One year following the foreclosure sale date. A legal challenge period is the time mandated by law that a suit can be filed to recover property that was foreclosed improperly. This applies to tax deeds or liens that have been converted to Collector’s deeds. Top 10 Counties or Taxing Jurisdictions in Missouri (1) St. Louis County (2) Jackson County Independence (5) Greene County
Special Note: Foreclosures are still buzzing in Kansas City with many multi-unit prices at about $25,000 per unit. Meanwhile rent commands about $500 to $700 per month on average. What I’m seeing now are turnkey units that cost a little more than a year ago, but are ready to be rented with very little if any rehab. If you are interested, I will put you in touch with a licensed real estate agent on my team here in Kansas City. All the best, Michael Williams 1-913-381-4520 Newsletter archives: http://www.rogueinvestor.com/newsletter |
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