Online Tax Sale Investing in 2006: Part 2 (Focus on Arizona)

Stay tuned in the next day or two for a Special Edition of the Rogue Real Estate Investing Report with the link instructions to download your free electronic copy.

Now, let's get back to Online Tax Sale Investing. In this newsletter, I want to focus on Arizona. Why? Because Arizona sales are this month and the State has quickly adopted online tax sales.

Last year (2005), I participated in the first online tax sale in Arizona in Mohave County. Here is a summary of what happened.

In 2005, I spent quite a bit of time in Las Vegas. Since Mohave County, Arizona is located next to Clark County, Nevada, I decided to do some research in Kingman, Arizona, the county seat. While in Kingman, I stopped by the Kingman Daily Miner (local newspaper) to pick up the official list of properties. I believe the cost was a whopping $1.00. I'm sure you can have the newspaper send it to you and as you will learn later, I will show you how to find the list online.

While in Kingman, I visited the Mohave County Treasurer's office and filled out the necessary paperwork for bidder registration, including leaving a voided check from our company bank account. The registration process had to be completed the week before the actual sale.

Having everything in order, I returned home and did my necessary research and planned out which liens I was interested in. SRI-Online conducted the sale so you had to attend the actual sale on SRI's website. The sale lasted the entire week of February 14, 2005 and was divided up so that you could only purchase liens within the first "block" of liens on day 1 and each day another block was available. For example, on Day 1 (February 14), liens 1 through 4,404 were available; on Day 2 (February 15), liens 4,405 through 10,509 were available; and so on; and on the last day (February 18) all previously unsold liens were offered again.

So how did the sale turn out?

In my mind, there are improvements to be made. That is why it appears that Mohave County is not using the same auction company this year. One main problem with the February 2005 sale was bandwidth or Internet connection issues. Many bidders tried to access the site to bid at the same time. So, if you had an excellent Internet connection such as one at a large company, then your chances for accessing the pages were better. On the other hand, if you had a poor connection, then you got beat out for the bid.

To make matters worse, the County and the auction company did not coordinate their numbering systems so that the County's system changed the numbering when liens were redeemed ahead of the sale.  Instead, the auction company stayed with the original numbers.

During the auction you placed bids in what is called "proxy bidding" style. Each bidder enters his/her lowest bid for a certificate, starting at 16% and going down to 0%. The auction software checked the bids, and if a bid was already lower, then you were prompted to enter a lower bid. Usually, the system would show the lowest bid, but that did not always update as quickly as it should have. The system stopped entering bids when the lowest acceptable bid was reached.

In Mohave County, real estate investing is somewhat speculative because of its close proximity to Las Vegas. Therefore, in many (if not most) cases, bidders immediately entered zero (0%) as their lowest bid. So it was a case of who could access a web page the quickest and enter 0%. Why would anyone enter 0% as their lowest bid? The answer is that these bidders do not care about the interest rate, but rather they are going after potential property ownership. Most liens will be redeemed and they will earn nothing; however, a few liens will not be redeemed and these liens will be foreclosed on and the investor will earn a handsome return.

Just a note - some other systems, such as this year's Maricopa County and Yavapai County sales do not penalize you for being late. They allow for tie bids and a random number generator is used to select a winner. This seems to be the trend going forward. Online bidding procedures and computer technologies are improving and constantly evolving. Therefore, I expect this year's online sales to be much better.

Here is an overview of what you need to know for Arizona Sales.

• To be eligible to bid, you must complete IRS Form W-9, submit a deposit (online via ACH) usually based upon your budget (in some counties it is 10%) and receive a bidder number. Contact the county as quickly as possible - time is running out. Any amount leftover will be refunded to you.
• Don't be confused about 2004 taxes. It is the 2006 tax sale, but the delinquent taxes are from 2004.
• You bid in 1% increments, beginning at 16% and descending down to 0%.
• If you are the only bidder at any percent, you will get the full 16%. Example, if you bid 5% and no one else bids against you, then you will automatically get the full 16%.
• Any liens not receiving a bid will be struck off to the County and available over the counter.
• Bidding will occur in batches (Yavapai County will use 2-hour batches, for example).
• Arizona tax sale lists are available from the county (usually requires a fee), from a local newspaper or through this website: http://www.publicnoticeads.com/AZ/ (click on delinquent tax, then manual search and select the county you are interested in).

Online Tax Sale Research Teleseminar Reminder

Just a reminder, we will be conducting our first Online Tax Sale Research Teleseminar, using the upcoming Kern County, California sale as an example.

As a special bonus, during our February 12 online tax sale research teleseminar, we will talk about Arizona online tax sales immediately after the California information. You must signup (click here) or call (913-381-4520) by noon on Friday February 10 so we can process your order and get you set up.

P.P.S. Please watch out for a Special Edition of the Rogue Real Estate Investing Report with the link instructions to download your free electronic copy of the 2006 Edition of the Rogue Real Estate Investor Collection.