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.

About $242 Million, or nearly six percent of the 2008 property tax levy in Maricopa County, Arizona, was uncollected at the June 30, 2009 fiscal year end (FYE). The study details our findings, illustrated with useful charts and graphs.

We reviewed tax delinquency and tax sale statistics from the Maricopa County Treasurer's Office back to tax year 2000, and examined the following indicators:

• size of the overall tax levy
• uncollected portion of tax levy at FYE
• percentages of FYE delinquencies advertised for the ensuing tax sale
• average lien values advertised and sold at auction
• average interest rates of winning bids at auction, and
• other tax sale results.

In addition to our observations, our study reaches several conclusions:

• average tax lien amounts will increase substantially at the next auction
• winning interest bid rates will likely be higher than in recent years, increasing investors' yields, and
• in some property categories there will be a risk of accumulated tax liabilities (by the time the liens may be foreclosed) approaching actual market value of the underlying property.

The special report is entitled: "2010 and 2011 Arizona Tax Lien Sales Promise To Be Largest in History," and is available as a pdf download in the Shop for $39.