Wednesday, July 30, 2014 Brad Westover | National Tax Lien Association
Have you ever invested in tax liens in Louisiana or Missouri? Chances are the answer was "NO!" Currently 29 states sell tax liens to the private sector but some are much more attractive than others. When evaluating whether or not you want to invest in tax liens you look at many factors including, but not limited to: interest rate, redemption timing, location, property assessment accuracy, time of year, due diligence requirements, local governments cooperation, tax foreclosure processing, deposit requirements, bidding protocols, and much more.
Recently State and Local governments from Louisiana and Missouri have requested the (free) services of the National Tax Lien Association to solve the mystery of "How can we be more attractive to tax lien investors?"
On behalf of the NTLA, Executive Director, Brad Westover was placed on a Missouri State Task Force to explore enhancements to the current process. One problem to be remedied was the inability to get clear title from a tax foreclosure. Ultimately the tax lien investor must have a clear method to promote payment such as tax foreclosure due process ... without such, Missouri Tax Lien investing remains unattractive. The task force is currently addressing this tax title issue with the assistance of Tax Title Services, an NTLA member, to assist with the due process notification requirements on all tax foreclosures. Additionally the State is also looking to cap the legal fees allowed for any tax foreclosures to protect the property rights of those in default.
In Louisiana, the issues are a little more complex with Napoleonic Law and lots of legal question marks. Let's start with an inability to tell whether or not you are buying a tax lien or a tax deed. Perhaps you don't really care if you are a small local investor but there is not a tax lien lender in America that will lend without fully understanding what kind of financial instrument is issued. The second issue to be addressed is the practice of bidding ownership interest (which no bank likes). The successful LA bidder is the one willing to accept the lowest ownership interest which means if the property does not redeem the investor basically becomes a joint owner (at the ownership rate). If the property sales for $100,000 and the tax lien investors bid the ownership interest to 10% all encumbrances would be cleared and final proceeds would be split 90% to the delinquent taxpayer and 10% to the investor. While some investors love the fixed rate of return of 12% per annul, others steer clear as the ultimate enforcement measure of tax foreclosure is clearly diminished by bidding down the ownership interest.
Both Missouri and Louisiana are proactively seeking solutions to become more tax lien investor friendly. The NTLA will continue to assist in that process and stand as an open resource to promote tax lien sales in America. We welcome the opportunity to help our members and local governments across the country recognize and implement "best practices."
For more tax lien industry news, education, and insight the NTLA 2014 Fall Symposium will take place on October 23-24th in Washington DC. To register and view the agenda, click here.