The Basics of Tax Lien Season

January 2, 2020

Sarah Richardson
Founder and CEO, Tru Realty

 

Have you ever wondered if tax liens could be a good investment for you? The process of investing in tax liens can be financially beneficial but just as challenging for those who are new to the arena. In this article, we’ll break down the basics of tax liens for those who are considering making this investment in 2020.

Please keep in mind that the following information is specific to Maricopa County. Many other states and even counties in Arizona run the tax lien process differently. Processes, auction dates, and times for other states or Arizona counties can be found by visiting the county treasurer’s website for the area where you’re looking to invest.

What is a tax lien? 

The Maricopa County Treasurer’s office defines a tax lien as a security interest on a property for unpaid real estate taxes, assessments, penalties, advertising costs and fees. If a property owner fails to pay the delinquent taxes and fees, the Treasurer offers a tax certificate for purchase at the tax certificate sale.

 

How does a tax lien auction work? 

Tax lien certificates are sold to investors to recover the delinquent property taxes owed by the property owner. Investors are permitted to bid on each tax lien via auction (held online for Maricopa County). The bidding will auction off the amount of interest a bidder is willing to accept on the lien. Bidding starts at 16% and can potentially go all the way down to 0%. Bids may be made in 1 percent increments and a “zero” interest bid will get the bidder the certificate with no interest. A tax certificate only represents a tax lien on the property, it does not mean that the certificate holder is the new property owner, nor does it mean the certificate holder is promised ownership of the property.

 

When can I invest in tax liens? 

The list of available properties will be posted in mid-January. According to the Maricopa County Treasurer’s website, the parcels whose taxes are subject to sale will be advertised in the Arizona Business Gazette roughly three weeks before the auction. The auction itself will be held online on Tuesday, February 4, 2020 via maricopa.arizonataxsale.com. Bidder registration will open mid-January.

 

What are the bidder requirements for Maricopa county? 

  1. Visit arizonataxsale.com to complete online registration
  2. Complete IRS Form W-9, W-8BEN, or W-8BEN-E as applicable
  3. Submit a deposit (online via ACH)
  4. Establish a budget
  5. Receive bidder number assignment

 

What happens after I purchase a tax lien certificate? 

Each buyer will be provided a listing of certificates they purchased and he or she will be responsible for paying the balance due via ACH Debit on the Payments Page of the tax sale web site. Naturally, failing to make a payment by the specified due date will result in the certificate being re-sold. Additionally, the buyer will forfeit the deposit.

 

Other helpful information: 

  • In Maricopa county, the properties are auctioned off in the order that they appear in
  • Don’t be surprised if there are properties missing from the posted list on auction Delinquent property owners often make their payments just in time, after the list is prepared for publication.
  • A 10% deposit (minimum of $500) of your expected bids must be made prior to the close of any batch in which you intend to submit It’s required that all payments be made via the Treasurer’s website Payments Page.

This information and more regarding the Maricopa County Tax Lien process can be found by visiting: maricopa.arizonataxsale.com.