Dear Premium Members:

This month I want to profile the popular tax sale investing state of Arizona. Tax lien certificate sales are occurring right now, online, in four counties, and the remaining counties will hold their tax sales in February.

Maricopa County, Arizona
January 17 – February 7, 2011
http://treasurer.maricopa.gov/research/faq_lien.htm 
Auction website: https://www.bidmaricopa.com

Yavapai County, Arizona
January 18 – February 8, 2011
http://www.co.yavapai.az.us/BackTaxSale.aspx
Auction website: https://www.yavapaitaxsale.com

Apache County, Arizona
January 28 – February 17, 2011
https://www.bidapachecounty.com

Coconino County, Arizona
January 28 – February 17, 2011
http://www.coconino.az.gov/treasurer.aspx?id=548
Auction website: https://www.coconinotaxsale.com

Visit http://www.rogueinvestor.com/Tax_Sale_Calendar.pdf for our recently revised tax sale calendar (password = taxsales).

In Arizona, the state-mandated interest rate on certificates is 16 percent, so this is where the bidding begins (the winning bidder pays the minimum bid and accepts the lowest interest rate). There is a three-year redemption period; but the property owner also is allowed to redeem any time after this period but before a Treasurer's deed is delivered to the certificate holder who forecloses on the property.

The following is a discussion of the tax lien sale process in Arizona. It will be followed by a screen of the Yavapai County tax sale list.

ARIZONA TAX LIEN SALES

General Information

Governing State Law: Arizona Revised Statutes, Title 42 – Taxation, Chapter 18 – Collection and Enforcement, Article 3 – Sale of Tax Lien for Delinquent Taxes, and Article 4 – Redemption of Tax Liens and Article 5 – Judicial Foreclosure of Right of Redemption, and Article 6 – Administrative Foreclosure of Right of Redemption

State Statute: http://www.azleg.gov/ArizonaRevisedStatutes.asp?Title=42

County Agency Conducting the Sales: County Treasurer

Private Administrators of Sales: Yes: Realauction (http://www.realauction.com) and Grant Street Group (http://www.grantstreet.com/revenue_collection/lienauction)

Sale Date: The tax lien sale must be held in February. The sale continues from day to day, Sundays and holidays excluded, until the tax lien on each parcel has been sold. (ARS 42-18112[A] and [B]. Some online sales begin in January and end in February.

Public or Internet: Both.

Interest Rate: 16 percent (ARS 42-18114 and 42-18053). The lien bears interest at the bid rate from the first day of the month following the purchase of the tax lien (ARS 42-181140).

Redemption Period: The lien may be redeemed at any time within three years after the date of the sale; or after three years but before the delivery of a treasurer's deed to the purchaser or the purchaser's heirs or assigns. (ARS 42-18152)

Before the Sale

Obtaining the Tax Sale List: The list is posted near the outer door of the office of the County Treasurer for at least two weeks before the date of the sale. The list is also published at least one time in a newspaper of general circulation in the county. The publication must be at least two weeks but not more than three weeks before the date of sale. The newspaper that prints the list must also post the list from the first publication date through March 1 of the current year on the internet on a web site that posts the legal notices of ten or more Arizona newspapers. (ARS 42-18109[A] – [C]) For most counties, the list is also published on the County Treasurer’s website.

Registration: Most counties require a good faith deposit equal to a percentage of the total dollar amount of liens the bidder anticipates winning.

For example: If a bidder anticipates winning $100,000 in tax lien certificates and if that county requires a 10% deposit, he/she must deposit $10,000 with the Treasurer.

Special Note: Realauction hosts live training classes via the Internet every Friday while the Arizona auctions are live. Site Guided Tours are available at their practice site at www.arizonataxsale.com. A new practice auction runs every day. Visit https://www.arizonataxsale.com/training for more information.

At the Sale

Minimum Bid: The minimum bid is the total amount of all unpaid taxes that are delinquent on the property, together with all penalties, interest and charges due for the current or preceding years (ARS 42-18104 and 42-18107).

Bidding Process: The winning bidder is the person who pays the whole amount of delinquent taxes, interest, penalties and charges due on the property, and who in addition offers to accept the lowest rate of interest on the amount paid to redeem the property from the sale (ARS 42-18114).

Payment: The purchaser of a tax lien is required to pay the purchase price in cash at the time of sale (ARS 42-18116[A]). Payment methods vary for each county. Generally, deposits and payments may be made via ACH (electronic check), wire transfer, cash, cashier’s check, or money order. The purchaser also must pay a processing fee of not more than $10 per tax lien (ARS 42-116[C]). If the purchaser fails to pay and the Treasurer cannot resale the lien or the sale is closed, the Treasurer can either advertise the lien specially, or recover the amount bid by civil action in a court of competent jurisdiction (ARS 42-18116[B]).

If because of an erroneous sale a real property tax lien is sold on property on which no tax is due, the County Treasurer must hold the purchaser harmless by paying the purchaser the amount of the principal and interest at the rate bid and endorsed on the certificate of purchase or 10 percent per year simple, whichever is less (ARS 42-118125).

Evidence of Successful Bid: The County Treasurer will deliver a certificate of purchase to the purchaser at the sale for delinquent taxes. Alternatively, the Treasurer may provide for a registered certificate in the Treasurer's records. (ARS 42-18118[A]). The purchaser must pay a fee of $10 per certificate (ARS 42-18118[D). Most counties today do not issue paper certificates. The certificate is kept as an electronic file at the treasurer’s office. A description of the information contained on a certificate is provided by ARS 42-18118(B).

Unsold Tax Lien Certificates: Unsold liens are assigned (“struck off”) by the County Treasurer to the state for the amount of the taxes, interest, penalties and charges, and a certificate of purchase is issued for each such lien.

These certificates are available for purchase by visiting the Treasurer's office or website once the auction is closed and balanced. These certificates bear an interest rate of 16 percent per year simple, with a fraction of a month counting as a whole month (ARS 42-18053[A]) and 42-18113[B][2]).

After the Sale

Paying Subsequent Taxes: On or after June 1, if a person who holds a certificate of purchase wants to pay subsequent taxes, accrued interest and related fees due on the property (i.e., after the second half taxes have become delinquent but before they go to auction), the person must present the certificate or receipt of registered certificate to the County Treasurer. The Treasurer will enter the amount of the payment on the certificate and on the record of tax lien sales (for a fee of $5). The amount of subsequent taxes bears interest at the rate stated in the certificate of purchase from the first day of the month following the purchase of the subsequent tax lien. (ARS 42-18121)

If a person who holds a certificate of purchase does not pay the subsequent taxes, accrued interest and related fees due on the property, the County Treasurer may require a person who wants to purchase a subsequent certificate of purchase on the property to acquire by assignment all currently outstanding certificates of purchase previously issued on the property. The County Treasurer will process the sale as an assignment on behalf of the previous holder of the certificate of purchase. Such an assignment vests in the person all the right and title of the original purchaser with the lien date effective from the original lien sale date. (ARS 42-18121.01)

Redemption Amount: Simple interest accrues on a monthly basis. If the certificate carries an interest rate of 12%, then interest will accrue at 1% simple interest every month until the certificate is redeemed.

Process if the Lien is Redeemed: When the owner redeems the certificate, he/she will pay the delinquent taxes, interest, and assorted fees and costs, and a check is sent out by the County Treasurer with a letter to the certificate holder. (ARS 42-18153[A]) The certificate holder must surrender the certificate of purchase.

If only a portion of the tax lien on the property described in the certificate of purchase or the registered certificate is redeemed, the Treasurer will endorse on the certificate or annotate the record of the registered certificate the portion redeemed and the amount of money paid to the person holding the certificate and shall take a receipt for the money paid. (ARS 42-18155)

Assignment of Tax Lien Certificate: The certificate of purchase, whether registered or paper, is assignable by endorsement. An assignment, when noted on the record of tax lien sales in County Treasurer’s office, vests in the assignee all the right and title of the original purchaser. (ARS 42-18118[C])

For any tax lien assigned to the State, the County Treasurer shall sell, assign and deliver the certificate of purchase to any person who pays to the County Treasurer the whole amount due under the certificate, including interest, penalties and charges, and in addition the entire amount of subsequent taxes assessed on the property described in the certificate. The County Treasurer shall collect a fee of not more than $10 from the assignee for making each assignment. (ARS 42-18-122)

Life Span of Tax Lien Certificate: Ten years. If the tax lien is not redeemed and the purchaser or the purchaser's heirs or assigns fail to commence an action to foreclose the right of redemption as provided by this chapter within 10 years after the last day of the month in which the lien was acquired pursuant to section ARS 42-18114, the certificate of purchase or registered certificate expires and the lien is void. (ARS 42-18127[A])

At least thirty but not more than sixty days before the expiration date, the County Treasurer must notify the purchaser by certified mail of the pending expiration. Within seven days after expiration, the Treasurer wil notify the purchaser by certified mail that the lien and certificate of purchase or registered certificate have expired. (ARS 42-18127[B])

This section does not apply if, at the time of expiration:

1. The parcel for which the lien was purchased is subject to a judicial proceeding or a 30-day notice pursuant to ARS 42-18202.
2. Other applicable law or court order prohibits the commencement of an action to foreclose the right to redeem. The expiration date of the tax lien shall be extended to 12 months following the termination of such prohibition. (ARS 42-18127[D])

I will send you a special report next week that discusses the method for foreclosing on the property if the owner does not redeem within the 3-year period.

County Tax Lien Sales Information

2011 Arizona Tax Lien Sale Links for the Largest Counties

(1) Apache County
http://www.bidapachecounty.com (Grant Street Group online sale)
http://www.co.apache.az.us/Departments/Treasurer/Treasurer.htm: see header “Informational Links”

(2) Cochise County
http://cochise.az.gov/cochise_treasurer.aspx?id=52

(3) Coconino County
http://www.coconinotaxsale.com (Realauction online sale)
http://coconino.az.gov/treasurer.aspx?id=548: mouse over “Tax Liens”

(4) Maricopa County
https://www.bidmaricopa.com (Grant Street Group online sale)
http://treasurer.maricopa.gov: see header “Liens & Research”

(5) Mohave County
http://www.mohavetaxsale.com (Realauction online sale)
http://www.co.mohave.az.us/ContentPage.aspx?id=132&cid=223

(6) Pima County
http://www.to.pima.gov/tax_lien_sale.html (public auction)

(7) Pinal County
http://pinalcountyaz.gov/Departments/Treasurer/Pages/TaxLienSale.aspx (online sale via the Treasurer’s website)

(8) Yavapai County
http://www.yavapaitaxsale.com (Realauction online sale)
http://www.co.yavapai.az.us/BackTaxSale.aspx

(9) Yuma County
http://www.co.yuma.az.us/index.aspx?page=86 (public auction)

YAVAPAI COUNTY, ARIZONA EXAMPLE

The Yavapai County tax lien certificate sale is conducted, for the County Treasurer, by Realauction.com. This is a privately owned company specializing in the advertising and sale of delinquent tax certificates for local governments and municipalities.

Step 1: Background Information

There is a great deal of information available online that you should read before you register for the tax lien sale. First, visit the County Treasurer's website at http://www.co.yavapai.az.us/Treasurer.aspx. There is a link "Treasurer's Back Tax Sale" in the left column (http://www.co.yavapai.az.us/BackTaxSale.aspx), and a link "2011 Tax Lien Sale" or "Online Internet Auction" in the main body (http://www.yavapaitaxsale.com). 

Click on the link for Treasurer's Back Tax Sale and you'll land on a page with links to all of the following:

• tax liens explained
• 29 frequently asked questions
• assessor book locations map
• 2011 tax sale list in pdf format (139 pages)
• available tax liens for purchase from previous sales (116 pages - these liens are available for purchase directly from the county and bear the full 16% interest rate)
• document with more information

I would even recommend contacting the Treasurer's office to see if you can find out any information regarding last year's sale.

Click on the link for 2011 Tax Lien Sale and you will be taken to the official auction website at http://www.yavapaitaxsale.com. On that site, be sure to read through the information available by clicking on the following links:

• Start Here: a discussion of how the sale works
• Bidding Rules
• Preview Items for Sale: the tax sale list

Once you are comfortable that you understand the process, proceed with registering yourself as a bidder.

Step 2: Register

You only need to register for the sale at the official auction website (http://www.yavapaitaxsale.com). There is no additional registration that needs to occur through the County Treasurer. Click on the link "Register" on the home page of the official auction website. The site will walk you through the entire process.

Step 3: Training

For training information, click on the links "Training General Information" and "Tax Certificate Process" on the home page of the auction website at https://www.yavapaitaxsale.com.

Live "webinar" training classes will be held via the Internet by Realauction on the dates and times listed on the website at https://www.yavapaitaxsale.com/training. The classes last approximately 90 minutes, cover use of the software only, and are free of charge. Attendance is by registration only. You will need to contact the Realauction Customer Service Center at (877) 361-7325 in advance to register.

In addition to the webinar classes, Realauction offers a fully functional "practice" site at http://www.arizonataxsale.com that you can use to familiarize yourself with the online auction process.  The practice auctions are held every day and close at 2:00 PM MT.  

From the home page of the practice site (http://www.arizonataxsale.com), additional training materials are available by clicking one of the two "Site Guided Tours" which contain page-by-page instructions on how to use the site.

You can also call the Realauction Customer Service Center and a representative will assist you.

Step 4: Tax Sale List

Use the list available on the official auction website at https://www.yavapaitaxsale.com/view_bids.cfm, as you will be able to sort the list and it has been populated with external data.

As you can see, for each certificate listed there is an ADV number, a parcel ID number, a face amount, and a status.

The ADV number is linked to a page on which the County Treasurer has compiled a lot of important information for you already:

• Property Information: Advertising Number, Face Amount, Parcel ID, Alternate Parcel ID, Property Address, Property City, Property Zip, Use Code, Property Description, Year Built, Construction Type, Lot Size, Beds, Baths, Living Sq Ft, Adjusted Sq Ft, Legal Description, Section, Township, Range, Exemption Description, Fire District, School District, INCORP, Subdivision, Tax Area, Model Type and Floor Area
• Certificate Summary: Unpaid Certs, Total Amt Outstanding, Redeemed Certs, Alternate Parcel ID, Current Number of Bids 
• Valuation: Limited Property Value - Prior, Limited Property Value - Current, Full Cash Value - Prior, Full Cash Value - Land, Full Cash Value - Improvements, Full Cash Value - TOTAL 
• Owner Information: Owner Name 1, Owner Name 2, Mailing Address 1, Mailing Address 2, Mailing Address 3 
• Mortgage Information: Lender Name, Mortgage Amount
• Outstanding Taxes: Tax Year, Sale Date, Lien Type, First Half Due, First Half Paid, Total Due, Purchaser Amt. Paid, Interest Rate, Purchaser Accr. Int., Purchaser Amt. Due

Pay special attention to any blue icons to the right of the ADV number column. For example, an asterisk is used to indicate parcels that have prior tax years due or an existing lien, but because of unpaid subsequent taxes they are going back into sale this year. If you purchase one of these parcels with a prior lien or prior year you are required to buy out the prior lien as well as the current lien.

A "P" icon refers to possessory rights parcels that are strictly improvements on the land. In the case of possessory rights and utility company parcels, the County Treasurer asks you to be very careful and have a complete understanding of what you are bidding on before you bid.

As part of your due diligence, you should visit the U.S. Bankruptcy Court for the District of Arizona at http://www.azb.uscourts.gov. Under the header "Online Services," click on the link "U.S. Party/Case Index." This takes you to an electronic public access service at https://pacer.login.uscourts.gov/cgi-bin/login.pl?court_id=00idx that allows users to obtain case and docket information from federal appellate, district and bankruptcy courts.

The Parcel ID number is linked to an interactive map that gives you additional information on the owner, parcel, improvements, assessment, taxes and recent sale information on the RESULTS tab. Be sure to look at the MAP LAYERS and SEARCH tabs as well.

The Face Amount is the minimum bid for the certificate. You can sort by ascending or descending values.

Finally, the Status column lets you know whether the certificate is still available for sale. Again, you can sort by ascending or descending.

Step 5: Screen the List

Let's start by looking at the entire list. Go to the quick search feature and do not type anything in the search and you will pull up the entire range of possibilities - over 4900 liens ranging from a ranch lot with taxes owed of $35.27 to a health club with a whopping tax bill of $67,677.60.

Now, let's use the export function to get the entire list on your computer.  Go to the download search results button. Click on the button and you will generate a file called a .csv file. Save this file to your computer and open it with Excel, Open Office or any spreadsheet or datbase program. CSV files are comma-separated files designed to be read by these programs.

You now have the entire list, which you can easily manipulate by using the sort features of Excel.

Why bother doing this you might ask?

One reason is that I like to look at the entire list in spreadsheet format and see what it has to offer without clicking on each link.

Now, having said that, let's go back to the Real Auction system and try another search that is often overlooked. Go back to the quick search feature and go down to City. Using only city, you can refer back to your spreadsheet list and decide on a city, such as Sedona, Prescott or Chino Valley. This is a location screen.

For example, try Sedona.

Using the location screen, you can now screen by the face value of the lien and the value of the property.

Try a face value less than $5000 and a property value of greater than $50000.

Once you have completed the screen, you should have something a little more manageable, but my list is still 200 liens.

So, it's time to look at the property type. This is personal choice, but I like land and in Sedona that's a valuable commodity. Let's try a search of acreage greater than 1.0 acre. That should screen out most small lots and leave larger pieces of land.

You may choose residential properties, duplexes, commercial, etc. Use the drop down land use codes and if you only want to search one property type, search, for example, between 11 and 11 and you will only pull up that type.

This leaves my list at 40; however, about half of these are unavailable, meaning they have been redeemed and pulled from the list. It looks like my final list is about 17, which is something I can handle.

Okay, here is a parcel, I might be interested in. It is in Sedona, but land only. It currently has only one bid. It is a recent tax lien with no outstanding liens and it is larger than 2 acres in size. The full cash value is approximately $40000 and the taxes owed is about $770.

Chances are the winning interest rate will be above 10%, maybe even 14 to 16%. If it is not redeemed, I can buy next years's taxes for  about $770 and the following year's taxes for the same amount. In the end, assuming it is never redeemed and I have to pay 3 years of taxes, plus legal and/or title fees to foreclose and clear the title, I am into the property for about $4000 to $5000. To be conservative, double that and assume I have to hold it for three more years. My total investment is $8000 to $10000 and I can sell it for $40,000 assuming no additional appreciation, which would just about cover realtor fees anyway.

The question is, "Would you give me $10,000 if I gave you $40,000?"

That is the tax lien game in a nutshell.

The downside is earning the interest rate at 10% to 16%.

When you are ready to place a bid, place your minimum bid amount, which is the minimum percentage you are willing to bid. For example, you could place a bid of 7% and if you are the lowest and the other bids are 16%, 14% and 12%, you would win the bid at 11% even though you bid 7%. This is called proxy bidding.

Wishing you the best,

Michael