John Lefebvre

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Presented by

• John Lefebvre

Weld County Treasurer PO Box 458 Greeley, CO
80632 [phone] x3290 http//www.co.weld.co.u
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Purpose

• Dispel myths
• Present risks
• Describe the opportunity

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Treasurers Duties
1) Collect property taxes 2) Disburse funds to
underlying districts 3) Invest the difference

• The 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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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? 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 issue roughly 4 to 6 deeds each year
usually 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
  usually in estate situations

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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

• August - Endorsements

• September-October - All delinquent real
  properties are advertised in a local paper for
  purchase at the tax lien sale.

• Prior to December - 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.

• The tax lien sale is generally held in November.

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Tax Sale Certificates
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Redeeming Certificates
How are certificates redeemed?
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

• 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. NOTE 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, 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.

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Difference Between Rate and Yield

• Yield is the total amount of true profit.

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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 and pay a
5 premium 1,050.00.
November 12, 2005 The property owner pays the
taxes and 1 months interest for a total of
1,010.
It is possible to lose money if an owner redeems
the tax lien before enough time has passed to
recoup 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.
In this second example, a profit is earned on a
typical transaction.
August 2006 The taxes remain unpaid and you
endorse (pay the second year). You now have a
total of 2,050.00 invested.
September 2006 The property owner pays the taxes
for a total of 2,150.
The Treasurers office pays the investor. You
made a profit of 100.
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Endorsement
Is the option for the current lien 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 - 350 - Any remaining balance
(usually small) is refunded.
Included in the 350 Deed Cost
- Treasurers fee of 75
- Owners Encumbrances (reports follow chain of
title)
- Notice to Parties
- Plus advertising - 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

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Deed Process
Receive Deed March 2009
Apply for Deed September 2008
EndorseAug 2008
EndorseAug 2007
EndorseAug 2006
BuyNovember 2005
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Treasurers Deeds Issued

• Weld County Deeded 1 Property in 2007
• Only one property in the past 18 years had a
  house on it

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Investigate properties before investing!
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Property Information

• Tax Lien Sale List
• Web Site
• http//www.co.weld.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

Drainage ditch and is unbuildable.
New Subdivision - All lots valued at 30,000
Unless 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 a County employee and their
  immediate families
• Register with the Treasurer
• Tax Sale on November 1

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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

• Potentially high-yielding investment.

• After 3 years, the lien holder has the right to
  apply for a Treasurers Deed to the property.

You could end up owning the property!

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

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Conclusion

• Tax Liens are an investment

You buy the lien 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 buyers come back year after year.
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2007 Tax Lien Sale
November 1 Online, see web site for details
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• Thank you for coming!

• Weld County Treasurer
• John Lefebvre
• jlefebvre_at_co.weld.co.us
• 970-353-3845 x3290
• A special thanks to the Jefferson County
  Treasurers office for their contributions to
  this presentation.