Assignments Continued

The form of the assignment: the actual document for assignment should be done by competent counsel or the approved form should be acquired from the taxing jurisdiction, if they have a form available.

Cost of the assignment: Be aware that some jurisdictions have quite high fees for assignments. Polk County, Iowa is one such jurisdiction. I do not know what the current cost for an assignment in Polk County, but at one time it was $150.00 per lien.

What do you notice? Again, in every jurisdiction that I am aware of you have to notice all parties who have an interest in the property. You should also determine if any of these parties meet the following descriptions:

1. A member of the military.
2. A person who is incapable of managing their own affairs due to physical or mental handicap
3. A minor child.

The reason you would like to know if any of the interested parties meet these descriptions is that you may have additional duties to perform if they are. Again, you must consult your attorney about this because you cannot afford an error.

Next Post: Types of Notices

Assignments

The major disadvantage to purchasing tax liens is lack of liquidity. What does lack of liquidity mean? It means that it is not easy to sell the investment and turn it back into cash. That does not mean it is impossible, just a little more difficult than stocks, bonds, or your passbook savings account.  How is this done with a tax lien?

With a tax lien you assign your interest in the tax lien to another person. This assignment is a document that needs to be recorded with the taxing jurisdiction. The problem you will have is finding an individual who wants the tax lien you purchased.

I always suggest you try to get an idea of who was bidding on the liens you purchased and get their contact information so you can approach them if you need to liquidate your portfolio. In addition there are a number of institutional firms that might be interested in buying your liens, assuming you can give them an adequate due diligence package.

If you have followed our suggested due diligence methods and kept your information, you should be able to prepare an adequate due diligence package for prospective buyers.

There have been a number of attempts to organize some sort of secondary market in tax liens, but to date none have been very successful. The reason is the lack of standardization on the due diligence and the expense involved for the acquiring party to determine what it is that you have to sell.

If you are attempting to sell your tax liens you must expect to sell them at a discount. This does not necessarily mean you will take a loss. It will depend on how long you have held the liens but you will more than likely have to sell them at a discount of some sort.

Why is this? Simple, the prospective buyer is going to incur a substantial expense in verifying your due diligence and they are going to want to get that expense back in some sort of discount. In addition, they may have more stringent criteria as to what they will purchase and they may well feel that your portfolio has more risk than they are willing to accept at the return that your portfolio yields. So expect some sort of discount.

Next Post: Continued Assignments

FREE Online Workshop

Join us Sunday,  November 22nd, at 9:00 PM Eastern Time

Click on the logo to the LEFT to Reserve Your Spot Now – It’s Free!

I want to invite you to a FREE online Tax Sale workshop Monday,  November 22, at 9:00 PM Eastern Time. At the workshop, you’re going to discover how to get started with tax liens and deeds in the quickest, easiest way possible and make money in as little as 30 days, even if you don’t have a lot of money to invest right now.

And because it’s a LIVE online workshop, you’ll be able to ask questions throughout the event.

Plus, you’ll quickly discover:

How To Start Buying Tax Liens and Deeds With Less Than $500 And Still Make Very Good Money…

The 3 BIGGEST trends for Tax Sale properties in 2009… and how YOU can use them to get ahead of everyone else trying to get in on this hot market right now…

How a 65 year old retired man on Social Security made over $157,326 in 120 days, starting with just a $900 investment – and how you can too…

How to make a Full-Time income, while only working in your spare time from home…

How to buy yourself a house for less than $1,000…

REAL-LIFE “Case Studies”… complete with actual results and action steps you can use to make money with tax sales – including how one man took his piggy bank saving of $596 and turned it into a $45,350 net profit in less than 9 months

… and Much, Much more!

This Online Workshop is absolutely free, but you must register NOW to lock-in your spot and get the special phone number and website page.

Almost every tax sale workshop we’ve ever done has been completely BOOKED SOLID, so if you want in – please register immediately.

How do you notice?

This will depend on the jurisdiction, but in most cases it will require a title search to determine who is a “party of interest”, or in other words, who has a reason to be notified because they have an interest, in some way or another, in the real estate involved.

It is my suggestion that you have a professional do the title search. You can do it yourself, but there is no allowance for errors. If you miss somebody in your noticing you can lose 100% of your investment.  The specifics of noticing vary greatly by jurisdiction, but some of the methods that may be required are as follows:

1. Personal Service by the Sheriff
2. Certified letter to each party of interest
3. A legal advertisement run in a newspaper of general circulation in the jurisdiction for a specified period of time or even posting of a notice on the property itself. Some jurisdictions may require all of the methods.

Form of the notice

Each state and possibly each jurisdiction within the state may have their own requirements as to the form of notice that is to be used. Your attorney should be able to give you the form or you can talk to the staff at the courthouse and they will probably be wiling to give you sample forms.  Remember that you are now dealing with legal documents and you are not allowed to vary from the court approved forms.

Next Post: Assignments

Redemption & Notices

What do I do if there is redemption?

1. Make sure you know exactly what your duties are when there is redemption of a lien.
2. This will vary greatly by jurisdiction. In some jurisdictions you will be required to return the lien.
3. In others you may have to execute a quit claim deed on the property.
4. There are a few jurisdictions where you have to do nothing, but it is your duty to understand exactly what these requirements are.
5. Not fulfilling the requirements can cost you to lose your investment.

Notices

The United States Constitution has a “due process” clause and one of the interpretations is that no person shall be deprived of property without due process of law. This is where notices come into play.

1. Every state has a requirement that the delinquent taxpayer be notified that they are at risk of losing their property.
2. In most states the requirement to give this notice is the responsibility of the lien buyer. THIS HAS TO BE DONE EXACTLY RIGHT AND EXACTLY ON TIME.
3. It is, again, your responsibility to know what the noticing requirements are and when they must be done.
4. Arizona, as an example, requires that you notice the property owner no less than 30 days prior to the hearing for foreclosure of right of redemption and no more than six months prior to the hearing. This description of a window of time for noticing is not rare and if you notice 29 days before the hearing or seven months prior to the hearing you have a very high likelihood of losing your investment.

There is a term in the law “time is of essence”, this means that proper timing is absolutely necessary. And in the case of noticing time is always of essence.

Next post: How do I notice?

Servicing the Purchase

Ok, so what does servicing mean?

Servicing is the term that includes all the administrative tasks that must be completed to successfully hold a tax lien portfolio through the redemption period, and if necessary, perfect your interest in the property if there is no redemption.

These tasks are as important as any other task you must perform when buying tax liens. You can do wonderful due diligence, be a master at bidding, and lose 100% of your investment if you are not aware of the servicing necessities of the portfolio.

There are a number of tasks that should be done, which we cover one by one:

Task 1: Create a Timeline

• When you return from the sale create a time schedule of when certain tasks must be performed.
• If you have obtained counsel they should be able to give you a list of all the tasks that need to be completed and when they need to be completed.
• If you haven’t retained counsel then you will need to make sure you understand the statue and have ALL the requirements noted and listed.

Task 2: Contact the Jurisdiction

• We advise that you contact the taxing jurisdiction once a week to check on redemptions.
• Find out who the individual who handles redemptions and ask them what their procedure is. Some jurisdictions will not notify you, others will. It is my suggestion that you check with the taxing jurisdiction no less than twice a month. The delay of two weeks can affect your return on investment substantially.
• At the time of your first contact with the jurisdiction about redemption procedures, make sure you get the names and addresses, with phone numbers, all staff members that you will need to talk with over the next few months about your lien.
• Add these names, addresses, and numbers to your worksheet for the jurisdiction.

Next Post: Redemptions and Notices

Financing Your Acquisition

This subject should really be discussed before the sale but we will talk about it now.

If you have a fair amount of capital for tax lien purchases, and for this purpose I would define “quite a bit” as more than $100,000, there may be the possibility to get some bank financing for a portion of the purchase. This use of leverage can, and I repeat the word, can, increase your return on investment. There are a number of banks who do finance tax lien acquisitions, and an even greater number of commercial finance companies who do so.

You will have to search carefully to find one who will do a transaction as small as $100,000, but there are some.  In most cases the decision will be based on your financial statement, business experience, and business plan.

Do not expect to get more than a 50% lending authority. But if you do manage that, your $100,000 will allow you to purchase $200,000 in liens. The effect of this leverage can be dramatic.

Assuming you bought your lien portfolio at a 10% yield, with $100,000 invested you would make $10,000 per year. If you can get 50% leverage, your $200,000 invested would make $20,000 per year, and assuming you borrow at 6%, you would pay $6,000 in interest, making your net profit with leverage $14,000 an increase of 40%.

In most cases, if you do finance your acquisition, you will be required to deposit your certificates with the lender or set up at rust account with the lender of their bank.

Next Post: Servicing Your Purchase

Reviewing your acquisitions

Before you leave the area I think it is a good idea to drive by each parcel you purchased a line on and to talk another photograph of the property for your records. First thing you want to do is check these photos again your due diligence photos of the property. I have had at least two instances where the property has been a victim of arson between the due diligence and the day after the sale.

Depending on the jurisdiction this will give you an opportunity for “a sale in error”. You probably won’t get out the sale, but you might.

Make sure you know what you purchased and make sure you have a photo of what you purchased – there are going to be a number of times before the redemption period expires either you are going to need to look at that photo.

Next Post: Financing your acquisition

FREE Online Workshop

Join us Monday,  November 16th, at 9:00 PM Eastern Time

Click on the logo to the LEFT to Reserve Your Spot Now – It’s Free!

I want to invite you to a FREE online Tax Sale workshop Monday,  November 16th, at 9:00 PM Eastern Time. At the workshop, you’re going to discover how to get started with tax liens and deeds in the quickest, easiest way possible and make money in as little as 30 days, even if you don’t have a lot of money to invest right now.

And because it’s a LIVE online workshop, you’ll be able to ask questions throughout the event.

Plus, you’ll quickly discover:

How To Start Buying Tax Liens and Deeds With Less Than $500 And Still Make Very Good Money…

The 3 BIGGEST trends for Tax Sale properties in 2009… and how YOU can use them to get ahead of everyone else trying to get in on this hot market right now…

How a 65 year old retired man on Social Security made over $157,326 in 120 days, starting with just a $900 investment – and how you can too…

How to make a Full-Time income, while only working in your spare time from home…

How to buy yourself a house for less than $1,000…

REAL-LIFE “Case Studies”… complete with actual results and action steps you can use to make money with tax sales – including how one man took his piggy bank saving of $596 and turned it into a $45,350 net profit in less than 9 months

… and Much, Much more!

This Online Workshop is absolutely free, but you must register NOW to lock-in your spot and get the special phone number and website page.

Almost every tax sale workshop we’ve ever done has been completely BOOKED SOLID, so if you want in – please register immediately.

After the Sale is Over

Once the auction is over there are some important tasks you have to begin. Obviously, paying for your purchases is one of the tasks you have but there are number of others that must be considered.

There are a number of different bidding systems at sales and there are even more payment requirements. Before the sale you determined what the requirements are at this particular auction, now is the time to do them.  Always do exactly what the county requires, don’t ask for favors and don’t expect them.

Checking Out

You can save yourself a great deal of trouble if you follow the next few sentences and them every time you go to a sale. Spend about two or three minutes per parcel purchased and make sure you know exactly what you bid on, and how much you bid. Do this before you go and make your payments.

When you check out with the treasurer, sheriff, collector or auditors staff, go over every purchase and make sure that what you bought is what they say you bought. If an error is made, and I have been to very few sales where an error isn’t made somewhere, this is the time to catch the error and make your case.

Since you kept records of all your bids while the auction was going on, you have a contemporaneous record of your bidding. Keep your temper and work with the staff of the jurisdiction and you will probably get the error corrected.  If you go home without complaining about the error the lien is yours forever.

Getting Names

Now is the time to get the names of the various jurisdiction staff members that you will be talking to over the redemption period. Make sure you introduce yourself and if possible find out how they would like you to check on redemptions, who handles assignments, and any other procedural tasks that you are going to have between now and the time that the redemption period ends.

This is a great time, if you haven’t done it before now, to ask if they can give you the name of a good lawyer who handles tax liens and/or real estate related transactions. The jurisdiction’s staff knows who is good in the area and if you work at it they may tell you a name or two.