Select a link from the Buying and Selling tab above to see county-specific tax lien auction information.
General Overview
Buying tax liens in Arizona is very competitive. Tax liens are auctioned-off by each county once a year in February — any tax liens that are not sold at the auction are then available over-the-counter. When you buy a tax lien, the county gives you an instrument called a Certificate of Purchase (CP). The CP certifies that you have paid specific back taxes on a specific piece of property. When a property owner or related party pays off the back taxes along with interest and fees, you will get a check from the relevant county with your principal plus the interest that you are entitled to, less fees. This payment from the county redeems your CP, at which time your CP becomes worthless.
When a property owner is late paying their taxes, the state assesses them 16% interest per annum on the amount due. The state and counties count on property taxes to fund state and local services. When taxes have remained outstanding, the counties create a lien against the property, and this is then auctioned off to investors in exchange for immediate payment of the back taxes. Liens are auctioned off the February after the taxes are a year overdue — this means that in February 2011, investors will buy 2009 tax liens.
Buying Tax Liens at Auction
The vast majority of tax lien certificates of purchase are sold at auction. By law, each county in Arizona holds their tax lien auction during the month of February. At the auctions, investors bid against each other for the right to pay the back taxes and receive some or all of the interest that the property owner owes. Investors bid down the interest rate that they are willing to receive, and the investor who is willing to pay the taxes on a property and receive the lowest rate of interest will win the CP on that property.
Buying Tax Liens Directly From a County in an “over-the-counter” purchase
CPs available “over-the-counter” are usually the “leftovers” that didn’t sell at auctions, sometimes for very good reasons. Although CPs purchased directly from a county earn the maximum rate, which is 16% in Arizona, this return may never be realized due to problems with the lien or the property. Always do your homework!
Buying Tax Liens Via a Secondary Market purchase from another investor (assignment)
Purchasing CPs in the secondary market would be attractive if more of a secondary market existed. At present time, however, this is not the case. While secondary market transactions do occur, it can often be difficult to match buyers and sellers. Companies like Arizona Tax Lien Services can facilitate this process while providing important ancillary services, like transaction escrow, accrued interest calculation and reporting. Please visit our “Listings” tab to see the liens available for sale from other investors.
Investment vehicles
Several firms and individuals have created tax lien investment partnerships or other structures. While this can be an attractive way of getting exposure,you need to do your homework to ensure that the investment manager is qualified and the fees are manageable and fair.
Selling Arizona Tax Liens
Tax liens are an illiquid investment, as you are not in control of when a property owner will redeem your CP. It is much easier to buy tax lien investments than to sell them. If you have a tax lien, a portfolio of tax liens, or an interest in a partership or other entity that is invested in tax liens that you would like to sell, we strongly encourage you to contact us at taxliensaz@gmail.com. The more information that you include in your email, such as the county, your bidder number and the property APN number, the more quickly we can get back to you. While we do purchase CP and related investments for our own account, we also facilitate transactions via the “Listings” section of our site; please contact us if you are interested in having us list your CPs on the Arizona Tax Lien Services site.
I participated in the most recent Maricopa county tax lien sale (2011) and purchased a few liens.
To my disdain I realized that although I held a CP for tax year 2009, there’s also a tax year 2008 holder for the same parcel! (on one particular lean i purchased)
I plan on purchasing all subtaxes and have recently learned that CP holder for tax year 08 will effectively have first right to foreclose even though I’ll hold tax year 09′, 10′, & 11′ (assuming Tax deed holder doesn’t redeem.)
Is there anything I can do so I’m the only tax lien holder for my parcel?
Kenneth Robert Gorski (first time tax lien investor)
krgorsk@gmail.com
Kenneth, thank you for this excellent post – it echoes many other questions we have received lately. Roughly half of AZ counties, especially the larger ones, are “multi-cert” counties versus “single-cert” counties. Multi-cert counties allow multiple tax lien holders on a single parcel. Single-cert counties only allow one CP per parcel, and you must subtax to maintain your interest. If you are intent on paying the subtaxes on your recently-won CP, we advise that you do so promptly on Wednesday, June 1. Subtaxing is first-come, first-served, so you’ll want to get yours in before the other CP holder on your parcel. Beyond subtaxing promptly, keep in mind that the odds of your CP making it unredeemed until foreclosure time are small. If you do find yourself able to foreclose in three years, you will then have an important decision to make. If you do not redeem the other CP holder, they can redeem you. If you do redeem them and then someone else redeems you, you will have nothing to show for the redemption money spent. We do not like the prospect of spending money for nothing, so we would choose to risk the other guy redeeming us first by waiting until title is in-hand before redeeming other CP holders. The odds of someone else redeeming, including during the foreclosure suit, are still pretty high. If you want total control of the parcel, you can always approach the other CP holder and try to buy their CP via assignment.
As a general rule, it is usually a good idea to consider taking title a remote possibility and orienting your strategies toward capital preservation and interest accrual. I hope this answers your question!
Adrian,
per our conversation: I appreciate all of your help, your extensive knowledge of the entire process is incredibly helpful. I appreciate you taking the time to help me get started.