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I received the following question from a reader today:
“I’m new to the lien and deed investment game. I have applied for many properties in Jefferson county and now am waiting for a response. How long do we generally have to wait to hear back from the State about a deed/lien? I know they say 2-3 months but I want to know what others have experienced.”
That is a very relevant question. Based on my experience, there are at least two key factors that determine how soon you might receive a reply from the State after you have applied for a tax certificate or tax deed:
- Calendar Cycle – The time of year in which you apply can be a factor. I have observed a “slow down” around the typical business slow periods—such as around the holidays at the end of the year. Another “dead time” would be in the September to October time frame. Property taxes for the next tax year become due on October 1st. Typically the State would not want to send out a quote in September that did not include the next year’s tax. Many times they are waiting for the particular county to send them that information—so sometimes the county is the reason for the slow down. October can be slow for the same reasons and also because of the backlog created in September.
- Demand – The State receives applications on a “first come, first served” basis. So if you have applied for a property and there are 15 applicants “in line” ahead of you. It may be a very long time before you hear anything from the State. Remember, each applicant has a 20-day “option” period. If 15 people take the full 20-day period, you are looking at possibly 10 months before you have a chance at it—and that doesn’t take into consideration any lag time between applications.
The office that handles these has I think four employees. They processes THOUSANDS of applications every year. I have found them to be remarkably efficient considering the number of items they handle.
Denise Evans has recently produced a very informative video on the subject of taking possession of tax certificate properties. There is very little information available about how to do this effectively. Denise is very thorough and I find her information to be very reliable. Download her free video HERE.
Many folks in my generation like to reminisce asking the question “Where were you when Elvis Presley died?” As some of you know, the tax lien investment business in Alabama “dodged a huge bullet” last week with the demise of SB362. The below narrative tells “where I was when SB362 died”.
Many of you were following SB362. If you were not, you can go here to catch up.
According to the status page for the Legislative website, the bill was to be voted on in the house on “Day 23” which was May 19, 2015. When that day came and went with no action on the bill, some of us breathed a collective sigh of relief.
That “sigh” was interrupted on Friday, May 29th when we learned that the bill had been added to the “Special Order Calendar” for legislative day # 27 (Tuesday, June 2nd).
On Tuesday, June 2nd, it just so happened that I traveled to Montgomery (in preparation to conduct the Montgomery County Tax Sale for June 3rd and 4th). As a last minute development, I was able to have dinner Tuesday evening with a house member and long-time friend. At the time, I had no idea if the bill had been considered that day or not. My friend-house member assured me that it had not passed because the bill was too far down the list to be considered before the house adjourned for the day. I asked him if the bill would be brought up again. He said it was possible but that if so, he was going to add some amendments to it. I asked what would happen if he could not add amendments. He said he would try to kill the bill in that case. I was again cautiously optimistic but acutely aware that the “witch was still alive”.
He also said that there was a rumor going around that the Senate was going to adjourn “sine die”. That means that the Senate was going end the session prematurely (without going the entire 30 days). Usually this is done when there is some sort of “rift” between the House and the Senate. Apparently the “rift” this time was over the state budget.
The next day (Wednesday, June 3rd) as we were about to begin the Montgomery County Tax Sale, a well-dressed gentleman came up to me and the Montgomery County Revenue Commissioner and introduced himself. He was a lobbyist. He asked if we knew about SB362. We assured him that we did. He asked if he could make an announcement about it so that the bidders in the audience could have the opportunity to contact their legislators about it. He was allowed to make an announcement.
After the tax sale that day, I waited for this lobbyist outside the courthouse to try to find out more information. I asked him what he knew about the background of this bill and where did he think it was going. He gave me quite an education in about 10 minutes!
He said the source of the bill was indeed the sponsor, Senator Trip Pittman from Baldwin County. Apparently one of Senator Pittman’s constituents had been among those in Baldwin County that for whatever reason had failed to pay their taxes and as a result had been adversely affected by an excess bid by an investor. Senator Pittman’s response was SB362.
The lobbyist then said that there were a couple of things “in the making”:
- There was a house member that was going to try to add amendments to the bill (my friend that I had dinner with on Tuesday) and that if the amendments were added that the bill was effectively dead because there was not enough time for the bill to go back to the Senate and get out before the session ended.
- The Senate was probably going to adjourn “Sine die” the next day (Thursday, June 4th or legislative day #29) because of a budget dispute between the House and Senate—and that if that happened then all pending bills would be effectively dead.
On legislative day #29, Thursday, June 4th, the Senate adjourned “Sine die”. Happy ending. The witch is dead (for now).
Now regarding Elvis Presley…….
This could be a huge problem if you think getting a 12% return is a good thing!
As Denise Evans mentioned HERE back on May 3, 2015, there are three bills pending in the Alabama Legislature that could drastically effect tax sales in this state. They are SB 53, SB 218 and SB 362.
As of yesterday, I checked the status of all three and with nine legislative days left, it appears that SB 362 is the only one that is gaining momentum. In fact, the bill passed out of the Senate on May 5, 2015!
I reviewed the bill today and from what I can tell, it does several things:
1. Reduces the interest rate from 12% to 7.5% on ALL redemptions of tax sales, when the tax sale occurs AFTER January 1, 2016.
2. In code section 40-10-122, raises the officer’s fee from $.50 to $3.00 (inconsequential in my opinion).
3. Provides that a redemption official may complete the redemption process WITHOUT verifying that the purchaser has been reimbursed for statutory improvements first (effectively doing away with the “Redemption Affidavit” requirement).
There are a number problems with this bill that I question if it’s supporters have considered:
PROBLEM #1 – Not all properties are sold to investors at tax sale. Many parcels are “Sold to State” each year. When a Sold to State property is redeemed with the county redemption official, the county collects INTEREST on the taxes due. That collected interest is shared on a “pro-rata” basis with all the “tax agencies”. Tax agencies are governments and organizations that are the end receivers of property tax revenue—— such as the state, counties, municipalities, SCHOOL BOARDS, fire departments, transit boards—–you get the idea. Has anybody asked the school boards about this?
PROBLEM #2 – The supporters of this bill obviously want deter corporate investors from coming to Alabama. [Keep in mind, there is already a statutory provision that protects the property owner from high interest costs as a result of an exorbitant excess bid—only that portion of the excess bid that is less than or equal to 15% of the market value of the property may earn interest.] When corporate investors buy certificates at tax sales, ALL THE TAX AGENCIES GET THEIR MONEY UP FRONT! There is no waiting around until someone decides to redeem their property. Would you rather have cash up front or an IOU that guarantees a 3-year loan to a borrower that you don’t know?
PROBLEM #3 – This potential reduction in interest rate also punishes the local investor—-the “little guy” that wants to branch out and earn more interest than he or she can get on their savings account or CD. This local person lives, works, pays taxes and votes local.
PROBLEM #4 – When you discourage investors from participating in tax sales, more properties are inherently going to be “Sold to State”, thus significantly increasing the number of properties in PROBLEM #1 above.
PROBLEM #5 – A bureaucratic challenge – As of January 1, 2016, counties will collect 12% interest from January 1st thru the date of their tax sale, then begin charging 7.5% interest from the date of the tax sale forward.
PROBLEM #6 – Another Bureaucratic challenge – As of January 1, 2016, counties will be charging 12% for all tax sales pre-January 1, 2016 and 7.5 % interest on tax sales post-January 1, 2016—–really?
PROBLEM #7 – This bill is an insult to the 98% of Alabamians that pay their property taxes. It rewards those that do not pay taxes. NOT paying taxes is supposed to be punitive—not rewarding.
In 1989, the statutory interest rate was raised from 6% to 12%. Many people complained about the increase. But you know I don’t recall ever hearing anybody complain who had paid their taxes on time! Shortly after the interest rate increased, a well-dressed businessman came to the counter in the Jefferson County Tax Collector’s Office to pay his delinquent property taxes. He was complaining about having to pay 12% interest instead of 6%. He said that each year he made a business decision about paying his property taxes. He bragged that up until then, he could go nowhere else and get a 6% loan, for up to 3 years, for which he did not have to qualify.
I have witnessed this business firsthand for over 30 years. If the sanctions for non-payment are reduced, the number of delinquencies must increase. Lowering the interest rate is going the wrong direction if we are serious about collecting property taxes. When considering changes like this, we all need to consider the whole picture and not just the “feel good” part.
It’s too late for the Senate. I recommend that you call your State Representative.
Last November, we had our very first “Alabama Tax Talk”. Since then many have wanted to know when we would have another one. We now have an answer to that question.
NOTE: This was originally scheduled for April 16th but a scheduling conflict necessitated a move to April 23rd. Also, Attorney Chris King will be joining us and can address some of the legal angles of Alabama tax lien investing.
Thursday, April 23, 2015 at 6:30 PM
5192 Caldwell Mill Rd, #104
Birmingham, AL 35244
This is your opportunity to ask any and all questions regarding tax lien investing in Alabama—for free!
If you are an Alabama tax certificate investor, and you have had any county redemptions in the past year or so, you have probably received a “REDEMPTION AFFIDAVIT” which you have to fill out, sign, have notarized and return to the appropriate party.
If this is a nuisance to you, consider letting Alabama Tax Properties handle this process for you. THERE IS NO CHARGE TO YOU.
E-mail if you have interest: [email protected]
Have you ever been reluctant to pursue a tax lien or tax deed because you knew there were other outstanding liens?
This very informative article by Denise Evans regarding where liens appear in the “pecking order”, will help you sort through the issue.
What are you reading or rather- Why are you reading what you’re reading? Books, ebooks, audio books- the market has exploded therefore we need to be asking ourselves “why”? Why this book? Why now?
Who Moved My Cheese? is a classic. If you haven’t read this one you need to today.
Those of us who had our little worlds rocked in 2008 know only too well the significant ramifications of change. “Change” that is that occurs outside our control. What about you? How did you fare? How will you fare from the change that’s right around the corner? And yes, change is right around the corner, actually it is happening all the time. Are you aware? Are you positioned to respond to change or are you going to let change happen to you?
Check out this allegorical story that comically, but soberly, shows how different personalities respond to their changing world. Are you Sniff, Scurry, Hem or Haw? I think you will discover very valuable new ways of thinking about what you do and how you do it and…… your kids will probably really enjoy it.
It is with enthusiasm that we announce the initial meeting of “Alabama Tax Talk”. Alabama Tax Talk is an initiative that we hope will introduce interested parties to the process of investing in Alabama property tax liens.
Our first meeting will be held on Tuesday, November 4th at 6:30 PM to 8:30 PM at The Heritage House in Odenville.
The Heritage House
12415 U.S. Highway 411
Odenville, AL 35120
Our sponsors for this meeting are:
The Heritage House, and
Chris King, attorney with Lex Christi Law
This event is FREE. If you plan to come to our initial meeting, would you do us the favor of sending a quick e-mail response to [email protected] to let us know? We want to be prepared in case we need to reserve Legion Field! (right)
Also, if you have a practice, business or service, and you would like to be a future sponsor of Alabama Tax Talk, please let us know.
We know that November 4th is Election Day and we encourage everyone to vote EARLY in the day.