NOTE: If you have not signed up for our free e-mail alerts, please sign up on the left column of this page! (more…)

As of May 19, 2016, the Alabama Department of Revenue will no longer allow me (or anyone else) to change the name on an assignment purchased from them.

That means the State will not allow anyone to apply for a parcel in one name, then actually purchase it in another name.

There is a contractual solution to this between the non-State parties.  I will plan to update this later.

This is a simple bill that seems to be beneficial.  This bill modifies Alabama Code Section 40-10-15.  It gives probate judges the option of utilizing contract services or products or other electronic means in order to more effectively conduct their tax sales.  It also provides for the probate judges to pay for those services basically by adding the cost to the tax bill.

This has been a need for a very long time.  As other states employ things like “on-line bidding”, this bill allows Alabama probate judges the opportunity to move into the 21st century in terms of how they can conduct their tax sales.

This is somewhat of a strange bill.  It modifies Alabama Code Section 40-10-121 ONLY.  Section 40-10-121 is entitled “Manner of redemption of land sold to state”.  It only deals with land that was “sold to state” at the local tax sale—-not to land that was sold to purchasers at the tax sale.

This bill provides that when properties that are “sold to state” are to be redeemed, the redeemer pays 12% interest on the amount due at the time of tax sale.  There would be no interest charged on subsequent years taxes that may be due at the time of redemption.

I think this is an oversight—-but don’t tell anybody!

In the last legislative session (2015), there was an effort to lower the interest rate on the redemption of tax certificates and tax deeds from 12% to 7.5%.  You can read about that here.  Thankfully, it failed on the last day of the session—but it was a nail biter!  You can read about that here.

Now we have a new effort, sponsored by the same senator trying to do the same thing.  It is Senate Bill 286.  Go here to see the status and view a copy of SB 286. [NOTE: For some reason you have to click on this link, then go back and click again to get it to work.]

My synopsis below of SB 286 is very similar to my synopsis from last year.  I have reviewed the bill 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, 2017.

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” or the “VERIFICATION OF ALLOWABLE EXPENSES BY TAX SALE PURCHASER” 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 to 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 inPROBLEM #1 above.

PROBLEM #5 –  A bureaucratic challenge – Because the author of this bill did not amend Code Section 40-5-9, as of January 1, 2017, 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, 2017, counties will be charging 12% for all tax sales pre-January 1, 2017 and 7.5 % interest on tax sales post-January 1, 2017—–really?  There will be 67 different counties implementing their own individual systems.

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.

PROBLEM #8 -The provision to for redemption officials to be able to complete the redemption of property WITHOUT having to verify if preservation improvements were made, will effectively “gut” efforts made several years ago by groups like the City of Birmingham and the Alabama Historical Commission (just to name a couple) that were trying to minimize blight.  Guess what increases when you remove that provision—-MORE BLIGHT!

My remarks from last year are still just as pertinent now relating to SB 286:

“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.”

Please contact your Senator.

A reader has asked a good question:  “Generally how long does quiet title process take in the State of Alabama?”

My answer:  As most of you know I am not an attorney but I have observed a few “quiet title actions” up close.  My layman’s opinion is that several factors can effect how long it takes to get a quiet title order.  I am speaking of the process as it relates to tax deed properties only.

  1. Is your attorney knowledgeable and reasonably aggressive regarding a quiet title action on tax deed property?  Be sure to choose the right attorney.
  2. Have you complied with the statutory provision of adversely possessing your tax deed property for at least 3 years?  If not, you may get not get to “first base” legally.
  3. What does the title look like?  Are there lots of other liens, mortgages, judgments, heirs, etc.?  The more players–the longer the timeline.
  4. How accessible are the parties in #2 above?  Are they alive, local, cooperative, responsive——these factors will determine how soon legal notice can be served.  If you have to revert to advertising, that can add time (and costs) to the process.
  5. How “backed up” is the circuit court system in your jurisdiction?  In more populous counties, it can generally take longer to schedule a hearing than in the more rural counties.

I have not known of one to take less than 3 months and I had one that lasted over 2 years.

I am sure that some of our attorney friends could provide additional information but these are factors that I have observed based on the few quiet title processes that I have witnessed.

In the past we have normally accepted checks for payment of products and services.  We are pleased to announce that we can now readily accept payment by charge card or wire as well.  This would include purchases of tax certificates and tax deeds.

When we discuss your next purchase, be sure to let us know what type of payment works best for you.

If you have an active price quote (“option”) from the State Department of Revenue, and you don’t want to buy the lien yourself, we may be able to help.  If you let us know soon enough, we can advertise the tax lien on our website and possibly get it sold for you.  We normally charge our regular fee to the buyer but then split that fee with the person that got the price quote.  Call or e-mail for details.  205-281-1587 or [email protected].

More and more I am running across folks that for various reasons want to liquidate a tax certificate or tax deed.  We are glad to help you do that.  Call or e-mail to discuss your specific situation.  205-281-1587 or [email protected].

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:

  1. 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.
  2. 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.  (UPDATED 1/19/2016–The video was free at the time of this original post.  Apparently she is now charging $7.99 for the 18 minute video.)