Tax Lien Study
June 26, 2007
Tax Deed Sale in IL through Surplus Property Auctions by Joseph E. Meyer & Associates
In many states, counties hold a Tax Deed Sale on tax delinquent properties. By Illinois law, in contrast, they conduct a Tax Lien Certificate Sale first, where you only buy a right to collect on property tax but not the right to own the property. Then what about the Tax Deed Sale in IL and what happens to properties not sold on Tax Lien Sale (the surplus)? The answer to both questions is in public services offered by Joseph E. Meyer & Associates. Joseph E. Meyer & Associates act as the County Trustee for 77 counties in Illinois. "One of Joseph E. Meyer & Associates` central functions is serving as the Delinquent Tax Agent (trustee for taxing districts) for 77 of 102 counties in Illinois. Properties not purchased by tax buyers at the County Tax Sales are enrolled in the trustee program and managed by Joseph E. Meyer & Associates. After the redemption period expires on delinquent properties, Joseph E. Meyer & Associates obtains tax deeds on behalf of the county and sells the properties at public auction. These auctions are conducted verbally or by sealed bid." In a nutshell, they conduct the Tax Deed Sales on counties behalf. On their website you can find answers on many questions about purchasing tax delinquent property in Illinois and also find out when is the next IL surplus property auction scheduled near you.
You may be already familiar with the company as their R.A.M.S (Real-Time Auction Management System) software is used by some 26 IL counties to conduct the tax lien auctions - each bidder (taxbuyer) is actually given a laptop with the R.A.M.S installed, and bids are done simply with a mouse click.
June 11, 2007
Tax Lien Forum
So far I've found one Tax Lien Investing forum that is worth watching and be a member off. There are several participants that seem experienced and are quick to respond. While they mainly concentrate on Florida, Arizona and Texas tax lien investing, there are a few investors there who can help with Illinois as well. If you're a newbie to TLI then you'll find this forum quite helpful. To participate, sign in as a general member of the Real Estate Investing Forums.
June 6, 2007
Tax Lien Investing requires non-liquid funds!
Tax Lien Investing requires non-liquid funds meaning that once invested it cannot be withdrawn for some period of time. When these funds become available again is up to the property owner.
Meaning that you need to put aside some cash before you start, cash that you won't use for anything else except buying tax lien certificates.
This is because how tax sales works ... As a taxbuyer you purchase a tax lien certificate, you pay the amount required by county, you're issued a certificate of purchase ... and now you wait for the owner to redeem the sale. In IL, the property owner has a 2 to 2 ½ year redemption period, depending on property classification. So your money can be stuck for up to 2.5 years until redeemed. But the wait can be worth it... unless, of course, you purchased tax certificate at the 0% bid and the lien was redeemed within 6 months - then you get your cash hosed up for 6 months without making a penny on it.
June 4, 2007
Tax Lien Investing: some good links for newbies
Here are some good links to get you started with tax lien investing. More information can be found on county sites.
Read these general definitions first on Wikipedia: seem to be more or less accurate info:
Tax Lien definition
Tax Lien Sale definition
Some nice reading that could be most true:
Tax Lien Investing Basics
More on Tax Lien Investing in general:
Buying tax liens online and eBay
Pitfalls:
How bankruptcy is affecting Tax Lien purchase
How can one get in trouble by buying tax on a bad property (on the bottom):
Inheriting a troubled property
Tax Lien blogs:
Buying Tax Liens in Maryland
How much tax investors can earn in different states. Read on top - the rest is just a sales letter.
Tax auction bidding interest rates and redemption periods by state
More interesting reading:
An overview of what happens in other states or what could happen
Some general ideas but only a sales letter
June 1, 2007
Tax Lien Investing returns 36% in IL? - how they get you!
Some websites claim that in IL investors gain up to 36% a year in interest earned on Tax Lien Investment. In theory, it can be done ... but only in theory. Here's how they come up with this number... In Illinois, the bidding on Tax Lien Certificates starts at the maximum interest rate of 18%. This amounts to a penalty paid by property owner if property is redeemed, and is what would be paid to the tax certificate holder if he got the winning bid at 18%. By IL statute if sold tax is redeemed within 6 months of the tax sales date then the investor gets one time of this percentage - 18%, if it is redeemed after 6 months but within 12 months, then the investor gets double - 36%. So, the overall yearly return on investment can get up to 36% of the property delinquent tax amount. While it all sounds fantastic, the truth is ... it's practically impossible to achieve since in Illinois most if not all tax sales are bidded down to 0% or close to 0% interest. So, if tax is redeemed within one year, investors earn nothing for that year.
Below is the excerpt from page 23 of the Illinois Property Tax System by Illinois Department of Revenue:
Then why are they willing to bid 0% ...??!! See my thoughts on this below ...
Tax Sale bids of 0% - why do Illinois tax lien investors bid 0% interest rate?
I've seen reports stating that in many Illinois (IL) counties competition between tax lien investors is so steep that most bids have been 0%. For example, many people who has been attending Cook County, IL tax sale report that most parcels are bidded to 0% right upfront. As soon as auction begins, they all go for 'Zero'. There's basically no bidding. In another example, on DuPage county's website, it say black on white that in the last several years the average successful bids ranged from 0% to 3%. So, what the catch? Why do they do it? Or the more accurate question is: "How do they make money on a 0% bid?". Here are the answers that I've come up with. You're welcome to comment or provide alternative explanation...
In Illinois, a tax lien buyer will bid 0% for one of three reasons:
1) Intimidated newbies: they bid 0% because they sees everyone else bidding 0%.
2) Numbers game for professionals: the more tax liens they buy the more chances they get that some of them may not redeem and they will get the properties.
3) Subsequent tax years: in Illinois, if you own a tax lien then you have a right to buy subsequent tax years at a flat rate of 12% a year, and with no competition.
May 30, 2007
DuPage County, IL Tax Sale Information
I've decided to research Tax Sale Information for DuPage County, IL on the their website before going there in person, and I've found that the information presented is actually very helpful as it is clear and is right to the point:
When: the tax sale is held each November. The actual sale dates and other specifics are available at 630-407-5900.
Where: in the JTK County Administration Building, 421 N. County Farm Rd., Wheaton, Illinois.
Delinquent Parcels List: a list published in local newspapers in November is not the same as the list available for purchase from DuPage County to registered investors. More information is contained on the County's tax sale list.
Registration rules: tax buyers must register at least 10 business days prior to the start of the sale. Registration forms are available in October, along with a list of requirements for buying at the tax sale.
Attendance: you must attend the sale in order to bid.
What will it cost: should you get a successful bid, your total cost will be (delinquent taxes + interest + costs of $104.00 per parcel)
Payments: to be made by cash or cashier’s check only.
Bidding: the maximum interest rate bid is 18%, the minimum is 0%.
Bidding History(!!!): "In the last several years the average successful bids ranged from 0% to 3%." (this is by far is the most important detail).