An Interview With the Maricopa County Treasurer
December 15, 2014
Charles “Hos” Hoskins, Maricopa County Treasurer
Article Written By: Tricia Covert
When we think of an Arizona real estate investor, a specific image may come to mind: someone who purchases land, residential homes, commercial developments and other types of real property. Someone purchasing tax liens typically would not be considered part of that image. However, there are an average of 1,200 investors every year looking to invest in tax lien parcels as a result of delinquent payments from Arizona property owners.
Hos Hoskins is the Maricopa County Treasurer in Arizona. As County Treasurer, Hos oversees the management of property taxes in Maricopa County. His team does everything from answer questions from the general public, mail out notices, create investment portfolios for the state and run the online tax lien auction. The 2015 tax lien auction is just around the corner: Tuesday, February 10th.
Our school conducts an annual Tax Lien Seminar in January to prepare attendees for the February online auction. The seminar educates novices as well as first time investors on the tax lien process and what to expect each year. Hos Hoskins provided us with an informative overview of what is involved.
Hos, can you tell me about your background?
I spent 20 years in the Air Force and worked for the state of Arizona afterwards for 14 years. In that role, I traveled around the state listening to appeals filed by property owners, challenging the values set by the County assessors. I then worked for the Arizona Department of Revenue as Assistant Director for the Property Division – I oversaw the valuation of all the properties in the state. I later became Director and then left my state job in 1989. I became a property tax consultant for 6 years before I fully retired.
After 13 years into my retirement, I received a call from David Schweikert, my predecessor. He persuaded me to leave retirement and submit my resume for his role when he decided to run for Congress. I was appointed to serve out the last year of his term and have been re-elected 2 terms since then.
What type of volume does the County Treasurer’s office deal with each year in property tax collection?
Just in property tax collection and distribution of taxes alone, we deal with 3.5 million transactions per year. In the time it takes to do this interview, we will process close to $5 million requiring about 3,000 to 4,000 transactions – most are done electronically. We have about 5 million contacts with the general public in Arizona per year and we respond to about 900,000 taxpayer inquires. We process a total of $10 billion in public money of which $4 billion is property tax related. We also manage an investment portfolio which is about $3.5 billion. We are probably the most connected agency with the general public of any state or County agency.
What is the main cause of delinquent tax payments in Maricopa County?
About 60% of delinquent taxes are due to people not having the money to pay their taxes. The other 40% is due to an incorrect mailing address due to a change in ownership or mortgage payoff. I encourage title companies to be a bit more diligent in advising their clients of property tax due dates when there is a change in ownership or a mortgage payoff. Many property tax delinquencies could be eliminated if this was done.
The response we typically hear from people who are delinquent is, “If you sent me a bill, I would have paid it.” What may happen is a title company may tell their clients that they’ll get something from the County Treasurer. The title companies are right, they will get something from us, but it’s a delinquent notice.
What is the process you take to prevent a tax lien situation?
Each year we send out two delinquent notices: our largest mailing is in June of about 150,000 notices. That mailing generates a lot of payments. For whatever reason, people think if they don’t get a tax bill, they don’t owe money – but it is the owner’s responsibility to know what their obligation is for their property taxes.
The second mailing is in December, which is significantly fewer – maybe about 40,000 mailings. Typically, these are the properties that are on the auction list. Around the same time in December, we also start putting together the auction list. Many people do pay their taxes during that time. If they don’t pay by the end of December, their property will be on the auction list.
Can taxes be paid after the property is placed on the auction list?
An owner can pay anytime up to the end of January to get off of the list. We usually have a crowd of people in our office on January 31st. The last week of January generates about another 20% of payments of total tax lien properties.
Did you see an increase during the recession period?
The recession did increase the number – it resulted in a pretty high average. In 2009 and prior, a lot of the delinquencies were residential. Then after the recession really took hold, bigger properties – such as commercial, were going delinquent.
What is the primary decision that needs to be made when an investor bids on a tax lien?
You’re loaning your money to the property owner to pay their taxes in exchange for a first place foreclosable lien. The main decision you have to make is what rate of return you are willing to accept for that loan – the maximum interest is 16%. About 1,200 other bidders may also want that lien, so you have to be prepared.
What is the value for an investor to buy a tax lien property in your opinion?
A tax lien investment is a pretty safe bet. The foreclosure rate – where ownership actually transfers to the investor, is about 0.5% – that’s up from .034% prior to the recession.
If you buy 200 liens, chances are you will take ownership of one of those liens. When an investor purchases a tax lien, they’re in first place – their position is superior to other liens on that property. You’re going to get your money back with a pretty decent rate of interest, plus a chance to own the property.
Can you give me an example of a foreclosure due to a tax lien situation?
We had a parcel 20 ft. x 30 ft. right in the middle of a property owner’s backyard. It was a separate parcel purchased by an investor at our auction. The person living in the property didn’t know this parcel was being foreclosed on because it was in a different name. The investor went to the property and delivered a foreclosure notice to the owner and offered to sell it back to her for $15,000.
Another example is a lien on an old cotton gin site that was about 5 or 6 acres. The investor bought it and paid the back taxes of about $80,000. The property had IRS liens, HUD liens and a couple of other liens. The owners had passed on and their kids didn’t want any part of it because it was too much baggage. The investor foreclosed on it and all the other liens went away. It’s an excellent way to clean up title by foreclosing on a tax lien. She subsequently sold it for about $300,000 – so that was a great investment.
Who is in the investment pool of people for Maricopa County?
There have been a number of investors who have been doing it for years and new investors join in all the time from all over the world. Usually, they’re single individuals. However, this year, we had a company out of California that bought $5 million worth of tax liens and they bid it at 2%-3% interest.
Would you say it’s lucrative for most of the investors?
Yes, a lot of investors do it full-time. I knew of a teacher who started this process with $500. After about 8 years, she quit her job and started investing full-time.
You have a 99% chance you’re going to get your money back with interest. The risk is extremely low as long as you don’t just go buy what is in print on the property. If you set general criteria – for example: I’m going to accept a 5% interest rate for all liens from $700 and below, you will get in trouble. Doing your research and knowing what you’re bidding on is important.
Is there a lot of administrative work when you purchase a tax lien parcel?
Most of the time you never have to even talk to the property owner – you just hold the liens. You have to wait 3 years to foreclose on the property. Then, if there is a foreclosure, you have to go through a regular eviction process.
What’s the best way to get the tax lien property list for the February 2015 online auction?
The list is available online at www.treasurer.maricopa.gov or on a CD. It’s categorized by parcel number and by areas in Maricopa County. Tax liens on the list are always from two years prior, so this year it will be for properties from 2013. We also list it in the Phoenix Business Journal and/or the Arizona Republic. The auction website will be available on January 19th for the general public.
During my interview with Hos Hoskins, it became very clear that research and having a set strategy is the crucial part of becoming successful with tax lien investments. Real estate professionals may have an advantage in this arena, mostly due to the knowledge that is naturally gained by working in certain areas in the Valley.
If you’re interested in learning more about Arizona tax liens, attend our seminar on Friday, January 30th, 9:00am to 12:30pm at our Scottsdale Campus. Learn how to conduct appropriate research to make wise investments, the advantages of getting into tax liens, how to use the computer bidding system and much more.
Tricia Covert is the Marketing Manager for the Arizona School of Real Estate & Business. She has more than fifteen years of marketing experience working in various industries at a corporate and small business level.