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Seminar Housekeeping

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Title: Seminar Housekeeping


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Presented by Treasurer
  • Faye Griffin

Jefferson County 100 Jefferson County
Parkway Golden, CO 80419 (303)
271-8330 http//jeffco.us/treasurer
3
Housekeeping
  • Please turn off all cell phones.
  • Please hold your questions until the question and
    answer session at the end of the program.
  • Everyone should have picked up a seminar handout
    on the way in.
  • The handout contains copies of the slides that
    will be presented, as well as some handouts that
    we will discuss.

4
Treasurers Duties
  • The Treasurers duties are to collect taxes,




    invest funds, disburse to districts, and
    act as



    county banker.
  • The 160 active taxing districts as well as the




    county depend on 100 collection each
    year to



    make budget.
  • The sale of tax liens help us meet that goal.

5
The Process
  • Understand tax liens
  • Research properties
  • Register as a buyer

6
No Risk
This Is The Perfect Investment
Obscene Profits
The Best Kept Secret In America
Spectacular Returns
Pennies on the dollar
You Always Win
7
If it sounds too good to be true it usually is!
Tax liens can be a good investment. This
presentation is designed to acquaint you with how
the process works in Colorado and help you make
an intelligent decision by investigating before
you invest.
8
Tax Liens
  • What are they?

They are a lien placed against real property for
the amount of unpaid taxes.
  • Is this a way to acquire real estate?

No. We do issue roughly 40 deeds each year, but
a deed on improved property is extremely rare.
  • Is this a way to get rich quick?

No. Be careful of misleading information.
9
Why Would Someone Let Property Go To Tax Sale?
  • Land Developers use it as a line of credit
  • Undesirable property that people dont want to
    retain
  • Miscommunication on who is to pay the taxes
  • Inability to pay the taxes

10
Property Tax Timeline
Taxes are collected in arrears
  • January - All property owners are sent a
    statement of taxes due.
  • July - All delinquent properties are sent
    delinquent tax statements.
  • September-December - All delinquent real




    properties are advertised in a local paper
    for



    purchase at the tax lien sale.
  • Prior to the second Monday in December - All




    delinquent real property tax liens in
    Colorado are sold to investors at the counties
    annual tax lien sale.

11
Tax Sale Certificates
Coupon Rate
Premium Percentage
Dollars Sold
Struck to Jeffco
Certificates Sold
Tax Sale Year
14
5.96
2,992,111
94
2299
1998
14
4.42
2,487,275
175
1930
1999
15
5.31
3,551,173
93
2047
2000
12
3.07
3,908,083
145
2256
2001
10
2.53
3,584,741
55
1866
2002
11
4.60
4,286,728
59
2183
2003
2444
148
5.09
12
4,454,845
2004
2005
6.58
2270
74
4,581,439
14
2006
2641
138
6,314,501
7.11
15
12
Premiums
A Premium is the amount bid at the sale which is
money paid over and above the amount of the tax
lien amount. This amount is not returned nor
does this amount earn any interest.
Premiums - How much to bid?
13
Return on a 1,000 Tax Lien
Based on a 15 yearly coupon rate
Redemption (Maturity)
Premium
1 Month
6 Months
1 Year
10-100
7-70
3-30
14
Rate of Redemption for certificates sold at tax
sale
As you can see, after 12 months almost two-thirds
of the certificates are typically redeemed.
  • 1 Month 7
  • 3 Months 22
  • 6 Months 38
  • 12 Months 64
  • 24 Months 80
  • 36 Months 90
  • 48 Months 96

It is also important to note that 1 in 5 of the
certificates are redeemed after just 3 months.
Depending on your bid, you could have LOST money!
15
Redeeming Certificates
How are certificates redeemed?
The property owner pays the delinquent back taxes
and interest due to the Treasurer.
The tax lien certificate may be redeemed at any
time until a Treasurers deed is issued.
16
Rate and Return
How is the interest rate determined?
  • It is 9 percentage points above the discount rate
    on September 1st (6.25), rounded to the nearest
    full percent, bringing the rate to 15 for this
    year.

Is it constant?
  • Yes, through the life of the tax lien certificate.

Example
Difference between rate and yield
  • Yield is the total amount of true profit.

17
Investment Examples
(Examples are based on a 15 yearly coupon rate
and 1,000 tax lien)
In this first example, you can see that it is
possible to actually lose money if a property
owner redeems the tax lien certificate before
enough time has passed to recoup the cost of the
premium paid for the certificate.
October 29, 2007 You buy the tax lien at the sale
and pay a 5 premium, so you invest 1,050.00.
November 10, 2007 The property owner pays the
taxes and 2 months interest for a total of
1,025.
The Treasurers office pays you the funds
received. You lost 25 of your investment in 2
weeks.
18
Investment Examples
October 25, 2007 You buy the tax lien at the sale
and pay a 5 premium, so you invest 1050.00.
July 26, 2008 The taxes remain unpaid and you
endorse (pay the amount due for the second year.)
You now have a total of 2,050.00 invested.
In this second example, a profit is earned on a
typical transaction.
September 12, 2008 The property owner pays
the taxes 15 interest for the first year and
3.75 for the second, for a total of 2,188.
The Treasurers office pays you the funds
received. You made a profit of 138.
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Endorsements
An Endorsement is the option extended to the
previous years tax lien certificate holder to
buy the current years lien on the same property
prior to the tax lien sale, without paying a
premium.
Advantage of endorsements
  • There is no need to pay a premium.
  • Draws interest from endorsement date (July)




    rather than from tax sale in October.
  • If discount rate drops, endorsing locks in




    higher rate from the earlier tax sale.

20
Deeding
When to apply
A Treasurers Deed cannot be issued until after a
minimum of three years from the date of the
original tax sale.
Often, lien holders will apply for the deed in
July (prior to the three year point at the end of
October) when they endorse the third year.
The deed process takes a minimum of 6 months.
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Deeding
  • Applying for a Treasurers Deed
  • Pay application fees in the Treasurers office.
  • Complete Deed application.
  • Complete Application addendum.

Costs associated with deeds
Deed Costs - 400 - Any remaining balance
(usually small) is refunded.
Included in the 400 Deed Cost Treasurers fee
of 35, Notice to parties and O E - Owners
Encumbrances (reports to follow chain of title)
22
Deeding
Possible Additional Costs with Deeds
  • Costs not included that could be incurred to
    obtain a good title

Survey
Quiet Title - Going to court to secure a clear
title
  • A Treasurers deed is not a warranty deed and
    could be contested

23
Deeding
Priority of the Treasurers Deeds
A Treasurers deed is superior to all other
encumbrances such as
  • Mortgage Lenders
  • Judgment Creditors
  • Mechanic Liens

Tax Lien Certificate Lien Holder Standings
See the letter Priority of Tax Liens in your
booklet.
24
Please Read This Letter Later To Help You
Understand The Priority Of Tax Liens
Here is a visual example...
25
Deed Process
Receive Deed January 2011
Apply for Deed July 2010
EndorseJuly 2010
EndorseJuly 2009
EndorseJuly 2008
BuyOctober 2007
26
Treasurers Deeds Issued January 2001 - December
2001
Certificate Number
Certificate Year
Date Deeded
Schedule Number
Assessed Land Value
Improvement Value
26404 1669 868 220 1285 1534 84 86 87 684 1105 140
1 1430 19
1971 1987 1991 1993 1994 1994 1995 1995 1995 1995
1995 1995 1995 1996
12-19-01 08-22-01 01-10-01 08-01-01 05-02-01 04-11
-01 02-07-01 02-07-01 02-07-01 06-13-01 06-20-01 0
5-16-01 08-01-01 05-09-01
065602 027029 167681 410630 131985 198689 041080 0
41181 086908 003664 133183 065814 012831 027447
200 1,450 440 1,860 870 200 2,030 3,050 1,350 8,55
0 7,890 1,180 200 9,030
0 0 0 0 0 0 0 0 0 0 0 0 0 0
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Investigate the Property before endorsing the Tax
Lien!
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Property Information
  • Tax Lien Booklet
  • Web Site
  • http//jeffco.us/treasurer
  • http//jeffco.us/assessor
  • Assessors Office
  • Public Terminals
  • County Libraries

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PRACTICE LOCATING A PROPERTY
NW
31
Tax Booklet Legend
  • -indicates schedule changed during current year
  • A-indicates abatement applied or corrected tax
    amount
  • E-indicates exempt property
  • P-indicates part of original amount paid
  • R-indicates fee of .025 of selling price or 25
    minimum for failure to return a Real Property
    Transfer Declaration
  • T-indicates active tax lien certificate
  • 7-indicates deferral
  • 8-indicates prior year taxes due

32
Possible Problems
Contamination
33
Possible Problems
Minerals
34
Possible Problems
Special Improvement Districts
35
Possible Problems
Strips
36
Caveat Emptor
37
Possible Problems
  • Property Value Inaccuracies

Lot 7 although equal in size to other lots in the
subdivision, consists of a drainage ditch and is
unbuildable.
New Subdivision - All lots valued at 30,000
Unless it is brought to the Assessors attention,
this lot will probably be valued at 30,000.
38
Registering as a Tax Buyer
  • Who can register?
  • Anyone except Jefferson County employees and
    their immediate families
  • Step 1 - Register with the Treasurer
  • On line registration
  • W-9 form voided check
  • Step 2 - Register with SRI for web auction
  • www.sri-auctionsonline.com
  • Registration ends on October 23 500 PM

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Safekeeping Of Certificates
  • All certificates are kept by the Treasurers
    office.
  • With the certificates retained at the Treasurers
    office, you will receive your payment faster
    after the lien is paid.  
  • This will allow you to endorse the certificates
    without having to find them and mail them in to
    the office. 
  • At the end of the sale, you will be emailed a
    list of the tax lien certificates you have
    purchased.

49
The Auction
  • The Treasurer has discretionary power in




    conducting the sale.
  • All sales are FINAL! Know what you are bidding




    on, remember Caveat Emptor
  • All purchases will be paid for at the
    conclusion of



    the auction
  • For each purchase the tax lien




    buyer is the owner of a fully negotiable
    instrument called a Certificate of Purchase

50
The Internet Auction
  • Begins October 25
  • Buyers must register with the Treasurer and SRI
  • Internet sale will close at various times on
    October 29

51
Internet Auction
  • We will make ONE attempt to withdraw money
    from your account the day after the sale ends.
    If there are insufficient funds or if, for any
    reason the transaction fails, all bids under the
    account may be cancelled and the liens sold to
    another party.

52
Important Considerations
  • This is not a way to obtain




    real estate
  • Tax liens are not a liquid asset, your money
    will



    be tied up for an unspecified amount
    of time
  • Early redemption may result in a loss on your




    investment (not of your investment)
  • There is no guarantee it will be paid

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Profit Potential
  • This is a potentially high yielding investment




    opportunity that is available to
    everyone who is



    willing to spend the time
    and energy necessary to



    investigate and
    manage their investments.
  • The interest rate is fixed for the life of the
    investment.
  • If the property owner has not redeemed the tax




    lien certificate after three years, the
    tax lien



    holder has the right to apply for
    a Treasurers



    Deed to the property.

Which means you could end up owning the
property!
54
Conclusion
  • Tax Liens should be considered an investment

REMEMBER you are buying the tax lien and not the
property.
  • Watch Out for the Pitfalls

Minerals, S.I.D., Strips
  • Know what you are buying

Buy in a familiar location and investigate before
endorsing or applying for deed.
  • Same Buyers Year After Year

We do have many of the same buyers coming back
year after year, so there must be something to
this.
55
2006 Tax Lien Sale
Internet October 25-29 www.sri-auctionsonline.c
om
56
  • Thank you for coming!
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