And a Nearly Sure-Fire Way to Lose Money

by Mark Manoil, January 27, 2010

Arizona law contemplates three principle ways to acquire a property tax lien: auction, assignment from the Treasurer, and assignment from another lienholder.  The evidence of the tax lien is called a “Certificate of Purchase” often referred to as a “CP”.

Tax lien auctions are required by law to be held during the month of February every year.  In our recent report, “2010 and 2011 Arizona Tax Lien Sales Promise to Be Largest in History,” we explained why we thought the February 2010 auction was likely to be historic in size and provide great opportunities for CP investors. Our expectations were confirmed last week when the delinquent parcel list for Maricopa County was published.

The purpose of this note, however, is to focus on assignments. While bidding at auction results in lower interest rates on the CP, investors who buy from the pool of liens not sold at auction, which becomes available after the auction, automatically get 16% rates on their CPs. Typically the liens to choose from are not as attractive as those bid for at auction, but may nonetheless provide valuable investment opportunities.

A CP is transferable, from one investor to another, by the process called assignment.  (Some county treasurer’s offices call this “reassignment”.)  All that is required is a notarized sale document signed by the seller and identifying the particulars of the CP: the underlying property’s parcel identification number, the CP number, and the seller’s identifying information.

by Mark Manoil

November 25, 2009

Given the big chill in the real estate market – whether from residential foreclosures or an inactive commercial sector – many property owners have not paid their 2008 year property taxes.

In a new report published this week at cpexchange.com, "2010 and 2011 Arizona Tax Lien Sales Promise to Be Largest in History," we examine property tax indicators and trends from the last decade, and conclude that in delinquent tax dollar terms, the 2010, and very probably 2011, annual property tax lien sales promise to be the largest in state history. Moreover, tax certificate buyers are likely to be rewarded with higher average interest rates.

Increasing property valuations leading up to the recent real estate bubble popping had resulted in increased property tax assessments and tax liabilities on properties. The bubble popping meant that many properties dramatically lost value, faster than the county assessor could accurately reflect on the tax roll.

So, just as the 2009 tax sale (for unpaid 2007 tax year liabilities) showed a nearly 50 percent jump over the February, 2008 sale for unpaid 2006 taxes, the 2010 increase of delinquent taxes advertised for sale over 2009 tax sale maybe as much as 100 percent.

Unpaid property taxes have put control of more than 150 homes in a polygamous community in jeopardy and more may soon be at risk -- part of a growing financial crisis that has reignited a rift between sect members and a court-appointed overseer.

Investment interests in 35 large, communal properties that are part of the United Effort Plan Trust were auctioned in a Mohave County tax lien certificate sale in February. The sale was triggered after about $124,000 of the $1.2 million total tax bill in Colorado City went unpaid in 2007.

See full article here .

March 20, 2009

Statutes of limitation provide a finite time in which to bring suit on a claim, and after that period, the claim is barred. In the tax lien context, the certificate of purchase “expires” if not timely enforced.

Arizona has three different statutes pertaining to limitations on foreclosure of property tax liens. Multiplicity of statutes is the result of different legislative sessions treating the subject of tax lien expiration prospectively first (i.e., not applying to already-issued tax liens), then retrospectively. Because there are differences among them, the statutes create both redundancy and ambiguity.