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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.
For years, we have attempted to come up with a good way to explain Alabama tax lien investing without having to repeat ourselves “a hundred times in one week”. One solution we have come up with is “Alabama Tax Talk”.
“Alabama Tax Talk” will be a series of meetings (to be held in various locations) that will give interested individuals the opportunity to hear an introduction to Alabama tax lien investing. It will include a question and answer period. Anyone is welcome but these meetings are especially designed for those who are new to the idea of tax lien investing.
We anticipate venues such as offices, businesses, libraries, etc. and would plan for the 6:30 PM to 8:30 PM time slot on a week night. We also hope to incorporate business sponsors. If you have an office or place of business were we could have one of these meetings (and you want to promote your own practice, business or service) please let us know.
Stay tuned for more info. We will send future messages with specific details.
Here is a question that I recently received:
“We keep hearing from folks that if a property is sold for taxes, all the mortgages and other liens are wiped out. Is that true? Do you know where the law is on that? We want to buy tax certificates but want to make sure we aren’t buying a bunch of old mortgages to go along with it.” (edited)
We’re NOT with the government, we’re here to help.