Seminar Housekeeping

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(No Transcript)
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TreasurerDiane Christner

• Presentation prepared byJohn Lefebvre

Adams County 450 S. 4th Ave. Brighton, CO
80601 [phone] http//www.co.adams.co.us
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Purpose

• Dispel myths
• Present risks
• Describe the opportunity

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Treasurers Duties
The Treasurer collects taxes, disburses funds
to the underlying districts and invests the
difference.

• The 148 active underlying tax districts, as
  well as the county, depend on full tax collection
  each year.

Selling tax liens helps meet that goal
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Key Terms Defined
Ad Valorem
Means according to value describes any tax
based on the value of the item. Property taxes
are an ad valorem tax.
Abatement
A procedure where the assessor finds an error in
a previous assessment or a propertys value, and
adjusts it accordingly. Overpayments resulting
from errors are refunded.
Actual Value
The appraised market value as determined by the
County Assessor.
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Key Terms Defined
Assessed Value
The actual property value multiplied by the
assessed rate. The residential rate is
7.96 The nonresidential rate is 29
Endorsement
The option extended to the previous years tax
lien certificate holder to buy the current years
lien on the same property without paying a
premium.
Mill Levy
One mill is one one-thousandth of assessed value.
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Key Terms Defined
Premium
The amount bid at sale over and above the tax
lien. This amount is not returned nor does it
earn interest.
Quiet Title Suit
Establishes the title to land by bringing into
court an adversary claimant and compelling them
either to establish their claim or forever after
stop asserting it.
Redemption
The owner pays the delinquent taxes plus fees and
interest. The tax lien certificate buyer is paid
the amount of the lien plus accrued interest upon
surrender of the tax lien certificate.
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Key Terms Defined
Safekeeping
The Treasurer maintains the buyers certificate.
Upon redemption the buyer is automatically mailed
a check and a Certificate of Redemption.
Strike To The County
Tax liens that do not receive bids at the auction
are struck to the county. They can be
purchased at any time after the tax lien
sale. DONT BUY THESE LIENS UNLESS YOU KNOW WHAT
YOU ARE PURCHASING
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Key Terms Defined
Special Improvement District
Special Improvement Districts (SIDs) are formed
by communities with the power to lay special
assessments on property for the construction of
certain infrastructures which benefit those
properties. More loosely, the term is used to
refer to other types of districts which have the
power to lay either ad valorem taxes, sales taxes
or special assessments.
Tax Lien Certificate
The document certifying the buyer of a tax lien
from the County Treasurer, and the right to any
payment against the delinquent property taxes.
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The Process

• Understand tax liens

• Research properties

• Register as a buyer

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No Risk
This Is The Perfect Investment
Obscene Profits
The Best Kept Secret In America
Spectacular Returns
Pennies on the dollar
You Always Win
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If it sounds too good to be true it usually is!
Tax liens can be good investments. This
presentation acquaints you with the process in
Colorado and helps you make an informed decisions
before you invest.
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Tax Liens

• What are they?

They are liens placed against real property for
the amount of unpaid taxes.

• Is this a way to acquire real estate?

No. We do issue roughly 4 to 6 deeds each year
on unimproved property.

• Is this a way to get rich quick?

No. Be careful of misleading information.
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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

• Inability to pay the taxes

• Miscommunication on who is to pay the taxes

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Property Tax Timeline
Taxes are collected in arrears

• January The statements of taxes due are sent.

• February - First half taxes are due the last day
  of the month - if paying in installments.

• April 30 - Full payment due.

• June 15 - Second half of taxes are due.

• June 16 - All unpaid taxes are delinquent.

• July - Delinquent properties are sent tax
  statements.

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Property Tax Timeline

• September-October - 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 annual tax lien sales.
  This is the final effort to collect taxes due for
  each tax authority.

• Adams County tax liens are advertised for sale
  in October and they are available on our web
  site. The tax lien sale is generally held in
  November over the internet at www.adamstaxsale.com

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Tax Sale Certificates
Coupon Rate
Dollars Sold
Certificates Sold
Tax Sale Year
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1887
2002

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1787
2003
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2885
2004

4,686,295
3,021
2005
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2,847
4,968,930
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2006
11
2007
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Redeeming Certificates
How are certificates redeemed?
Property owners pay 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.
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Rate of Redemption for certificates sold at tax
sale

• 1 Month 7
• 3 Months 22
• 6 Months 38
• 12 Months 64
• 24 Months 80
• 36 Months 90
• 48 Months 96

After 12 months over half of the certificates are
redeemed.

• 1 in 5 certificates are redeemed after just 3
  months.
• - Depending on your bid, you could LOSE money!

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Premiums
Premium is the amount bid at the sale over and
above the tax lien. Premiums are not returned
nor do they earn interest.
Premiums - How much to bid?
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Return on a 1,000 Tax Lien
Based on a 12 yearly coupon rate
Redemption (Maturity)
Premium
1 Month
6 Months
1 Year
10-100
5-50
2-20
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Rate of Return
How is the interest rate determined?

• It is 9 percentage points above the discount rate
  on September 1st, rounded up to the nearest full
  percent, bringing the rate to 11 for this year.

Is it constant?

• Yes - through the life of the tax lien
  certificate.

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Difference Between Rate and Yield

• Yield is the total amount of true profit.

1000 Taxes Sold 50 Premium 1,050
Total Paid Out
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Investment Examples
(Examples are based on a 12 yearly coupon rate
and 1,000 tax lien)
November 8, 2005 You buy the tax lien at the sale
and pay a 5 premium, so you invest 1,050.00.
November 12, 2005 The property owner pays the
taxes and 1 months interest for a total of
1,010.
In this example, 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.
You lost 40 in 4 days.
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Investment Examples
November 8, 2005 You buy the tax lien and pay a
5 premium, investing 1050.
August 2006 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 2006 The property owner pays the taxes
for a total of 2,150.
The Treasurers office pays the funds received.
You made a profit of 100.
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Endorsements
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.
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Advantage of Endorsements

• No need to pay a premium.
• Draws interest from endorsement date (August)
  rather than from tax sale in November.
• If discount rate drops, endorsing locks in
  higher rate from the earlier tax sale.

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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 apply for deeds in September
(prior to the three-year point in November) after
they endorse the third year.
The deed process takes approximately 6 months.
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Deeding
Applying for a Treasurers Deed
Pay application fees in the Treasurers office.
Complete Deed application.
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Costs Associated with Deeds
Deed Costs - 450 - Any remaining balance
(usually small) is refunded.
Included in the 450 Deed Cost
- Treasurers fee of 75
- Owners Encumbrances (reports follow chain of
title)
- Notice to Parties
-Plus advertising which is usually 80
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Possible Additional Costs with Deeds

• Costs not included that could be incurred to
  obtain a good title

- Survey
- Quiet Title - secures a clear title

• A Treasurers deed is NOT a warranty deed and
  can be contested

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Deeding
Priority of the Treasurers Deeds
A Treasurers deed is superior to encumbrances
such as

• Mortgage Lenders

• Judgement Creditors

• Mechanic Liens

Tax Lien Certificate Lien Holder Standings
See Priority of Tax Liens in your handout.
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Please Read This Letter Later To Help You
Understand The Priority Of Tax Liens
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Deed Process
Receive Deed January 2009
Apply for Deed September 2008
EndorseJuly 2008
EndorseJuly 2007
EndorseJuly 2006
BuyNovember 2005
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Treasurers Deeds Issued

• Adams County Deeded 4 Properties in 2004
• Vacant Land 250
• Severed Minerals 501
• Vacant Land 1,000
• Vacant Land 500

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Investigate properties before investing!
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Property Information

• Tax Lien Sale List on internet site of
  www.adamstaxsale.com
• Web Site
• http//www.co.adams.co.us
• Assessors Office
• Public Terminals
• County Libraries

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Possible Problems
Contamination
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Possible Problems
Minerals
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Possible Problems
Special Improvement Districts
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Possible Problems
Strips
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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.
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Registering as a Tax Buyer

• Who can register?
• Anyone except Adams County employees and their
  immediate families
• Register online at the internet site of
  www.adamstaxsale.com. Registration is open
  October 15
• W-9 form done automatically online
• Tax Sale on closes November 14

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Certificates of Purchase

• A certificate of purchase is issued for each
  lien.

• To receive your funds when the lien is
  redeemed, you need to present this document.

• Safekeeping Keeping Option
• Speeds up the receipt of your funds
• Relieves the burden of storing and presenting
  documents for endorsement and redemption.

• There is no charge for this service.

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The Auction

• The Treasurer has discretionary power in
  
  
  
  
  conducting the sale

• Sales are FINAL! Know what you are buying
  
  
  
  
  remember Caveat Emptor

• Purchases must be paid for at the end of the
  sale

• Buyer receives a Certificate of Purchase

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The Physical Auction

• Tax liens are sold in property schedule number
  order to the highest bidder.

• The amount bid is OVER and above the tax lien
  and applicable fees. It is called a premium and
  is nonrefundable and does not earn interest.

• Determine the maximum premium you are prepared
  to pay prior to bidding.

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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

• There is no guarantee it will be paid

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Profit Potential

• This potentially high-yielding investment
  
  
  
  
  opportunity is available to anyone
  
  
  willing
  to spend the time and energy necessary to
  
  
  
  
  investigate and manage their investments.

• If the property owner has not redeemed the tax
  
  
  
  
  lien certificate after three years, the
  lien
  
  
  holder
  has the right to apply for a Treasurers
  
  
  
  
  Deed to the property.

You could end up owning the property! (The
greater the value of the property, the less
likely the chance of ownership.)

• The interest rate is fixed for the life of the
  investment.

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Conclusion

• Tax Liens should be considered an investment

You are buying the tax lien and not the property.

• Watch Out for the Pitfalls

Severed Minerals, S.I.D., Strips, and Outlots

• Know what you are buying

Buy in a familiar location and investigate
beforehand

• Same Buyers Year After Year

Many of the same buyers coming back year after
year, so there must be something to this.
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2008 Tax Lien Sale
An internet tax lien sale at www.adamstaxsale.com,
open for registration, deposit and bidding
October 15 and closing November 14, 2008