County cancels tax lien sale. Post 111

A sign of the times: County cancels tax lien sale

Dayton Daily NewsDayton, OH Wednesday, November 19, 2008

Treasurer said no company bid on bundle of 650 properties owing a total of $2 million.

DAYTON – It’s one of those “you know the economy is bad when …” situations.

Montgomery County this week canceled its tax lien certificate sale, which is essentially an opportunity for a company to make up to 18 percent profit collecting property owners’ past-due taxes.

“Given the economic slump nationally and the recent local housing downturn, I am not surprised that investment companies that we have worked with in the past were unable to secure the funds necessary to bid on the bundle that we have offered,” Treasurer Carolyn Rice said.

The county bundled 650 properties that owe past due taxes totaling $2 million. Only one bidder, American Tax Funding LLC of Florida, expressed interest but withdrew before the sale, Rice said.

Rice said she won’t try again until next fall, when she hopes the economy will have improved.

Montgomery County began selling tax liens in 2005, as a way to collect on past-due property taxes. …The liens are sold to a company for the value of the past-due taxes. Companies bid by offering to charge interest rates at a maximum of 18 percent annually, and the award goes to the company that will charge the property owner the lowest interest rate, Rice said.

After one year the company is allowed to contact the property owner and can foreclose on the property.

Read the entire article: http://www.daytondailynews.com/n/content/oh/story/news/local/2008/11/19/ddn111908tax.html

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Coach Mitch’s REFLECTIONS

 

County acknowledges bad economy

In a move that is becoming common for a county to consider, the tax lien sale has been postponed. This decision is responding to two major factors: the housing bubble that has burst and borne a record number of foreclosures and a recognition that financial institutions do not want to risk their capital in questionable areas.

It’s the collateral –

The big, institutional buyers of tax liens are being choosy. They have to be. Banks and other institutional tax lien buyers all state emphatically that they are NOT in the real estate business. The reality however, is that the real estate, which is the underlying collateral, if foreclosed upon, must then be able to be sold in order to collect on their investment.

Banks ARE in the real estate business

I understand that banks feel that they must deny the idea that they are in the real estate business so that the public does not feel that it is being targeted when a foreclosure occurs. After all, IF the bank WAS in the real estate business, then the bank might create policies which would benefit the bank.

I’ll say more about this subject in another post. The short version is that the banks ARE in the real estate business. It may not be their main business but it is a significant side business, similar to them selling stocks or annuities. Therefore, the banks do have policies that will enhance their position, usually at the expense of those being foreclosed upon.

Investors look at collateral

Unfortunately, the Rust Belt has areas that are in real economic trouble. Ohio and Michigan, in particular, have significant swaths of real estate that are being labeled as “Not worth investing in.” The big investors are staying away.

Investors are avoiding certain areas in Michigan because of the large number of foreclosures, particularly property in Flint, Saginaw, and Detroit. The amount of available inventory is significant. Prices will remain soft until this inventory is bought up. Since there is no end to the bloodletting in sight in the mid-west, the big investors are looking elsewhere.

An example of current trends

I know of one investor who is trying to sell a package of 110 SFR’s and duplexes in Flint, MI for $330,000. That’s $3000 a house!!! They have gone through foreclosure but he hasn’t been able to sell them.

Prices have taken such a nose dive that some Florida county tax assessors have had to cut the property tax assessments by 50%. Taxes have not been cut in half. The tax rate (mileage rate) has doubled, so that the same amount of taxes is raised.

This is a major opportunity for small investors

The bundlers, sellers, and buyers of these large bulk REO packages are only seeking to make a quick hit. They are no different than the hedge fund managers who put together a finance package and sell it off, taking a cut. “Ollie, now look at the mess you’ve got us in.”

These REO bulk buyers are NOT seeking to maximize the potential of any single property. They will negotiate with you.

Small investors should be looking for single purchases that meet their investing criteria. Most banks are not selling bulk REO’s below 65% of the Brokers Price Opinion (BPO) however, this is not a bad price for a home in a good, stable neighborhood. If you believe that we will be coming out of this financial situation, then 65% is a decent price, but certainly not more than that.

Tax delinquent real estate is still your best bet

Even though foreclosures are at record highs, currently, the banks are holding firm to their REO pricing. This indicates their belief that the government will back them up and give-a-way pricing on REO’s does not have to be done.

A very high percentage of tax delinquents own their property free and clear. There are no debt obligations against the property and therefore no liens to pay off, such as a mortgage. Owning a free and clear property allows the owner to sell at any price they choose.

Coach Mitch’s “Ridiculously Simple System…” concentrates on locating tax delinquents who own their property free and clear. These folks can give us the best deals. This class of property owner is often WILLING to give a great deal and they are ABLE to cut their price because there is no mortgage to pay off.

A tax delinquent will often take 20% – 30% of the market value for their property. In this market, with prices dropping, they are happy to get ANY offer.

I have said it before – NOW is the time to act. 

See Coach Mitch’s “Ridiculously Simple System…” for details.

Make momma proud,