'17 '18 '19 tax lien certificates bought - can I foreclose in AZ?

Question

I have learned so much reading through this website, and appreciate all of the experts who take time to help and educate us newbies.

I bought several 2019 tax lien certificates in AZ last month where someone else owns tax lien certificates for 2017 and 2018 on that property.  My question is - does this 2019 sale make 3 years and can I start foreclosure proceedings now?  Or do I need to wait until the 3rd year is up?  Any advice would be much appreciated.

Thanks,

Kelley

Jerry K. · Answer

Thanks @Ned Carey. Kelley, I'm a little confused with your post, so excuse my questions. You bought 2019 tax certificates in last month's Arizona tax lien auction - correct? Let's concentrate on those before we talk about other people who own previous year liens on the same parcel.

In Arizona, the taxes you pay this year (2021) are the previous year taxes (2020). They are split in two payments. If the taxes are not paid, then they are sold in a tax certificate in the next auction - usually February of the next year. So if you don't pay your taxes due in 2021, you are delinquent on the 2020 taxes - which are sold in February of 2022.

Correct me if I'm wrong, the taxes you just bought in February 2021, were the taxes due in 2020, which are the 2019 taxes. Is this what you mean you say you bought 2019 taxes? Or do you mean you bought a certificate that was sold originally in the 2019 auction?

I'm going to go with the former of what I just described - you bought the certificate for the 2019 taxes that were due in 2020 but sold in February 2021 - for this next part of my explanation.

The way the 3 year redemption works in Arizona is this: The 3 year time period starts on the day you purchased the certificate (February 16, 2021 for example) - not the year the taxes were accrued (2019). Also, just because there are three years of taxes owed does not mean any of the holders can foreclose. Only the person who holds a certificate that is 3 full years old can foreclose. So in this example, if you bought the tax certificate on February 16, 2021 - then you can foreclose after February 16, 2024. It is 3 complete years from the date you purchased the tax lien certificate.

If other investors own a previous certificate on the same parcel, they can foreclose before you. They will have their 3 year period completed before yours. So using your example, the person who owns the 2017 taxes (bought in February 2019) still has one year left before they can start foreclosure.

The good news, is if they foreclose before you get a chance, they have to notify you and you will be paid off with interest.

If I'm mistaken with my assumptions, please let me know and I'll try to help answer your questions.

What county did you purchase your certificates?

Kelley Moffat · Answer

Thanks Will.  Yes, I definitely came at it with the idea of "why hasn't this person continued to buy the certificates on this property?".  This is my first year buying tax lien certificates, and while I felt like I did tons of research it's obvious that there were things I missed.  Next year I'll be more educated!

Will Sifert · Answer

That is the same way it works here as well. When ever you see that the property went to tax sale and was purchased in the previous years you have to take note that that person can come back and redeem.

This is a strategy some investors here use and I have done a few times in the past. You purchase at tax sale and then you don't pay the next tax bill, it goes back to tax sale the next year. From the date you lost it at tax sale you have 3 years to redeem the property. SO if the owner (or person before you) never redeems it you will have a 1 year window to redeem it before you lose it.  It gets a little complicated but once you think it through it's easier to follow.  Some people choose to buy at tax sale and then let it go so they don't have to tie up any more money in that property but they still reserve their spot in line in case it doesn't get redeemed by anyone who came before them. Keep in mind when you do go to redeem it, it is going to be costly, you will have to pay all of the back taxes, interest and penalties.

When ever I see a property at tax sale has been purchased at another tax sale the year or two before I do a little extra research into that property... why is that other tax sale purchaser letting it go. Is something wrong with the property and they just discovered this so they quit paying on it. Did they not have the funds to pay and are they going to wait till their opportunity to redeem it so I wont end up getting the property. Typically most people stay away from these for reasons I stated but there are always excepts especially if you can determine the motivation of the person who let it go before you. One time I traced a dual assessment property that had been purchased and sold at tax sale about 5 different times over 20 years. Other times I've seen this is a property that doesn't have a street constructed to get to it and likely never will. People bid on it and later find out it's not worth paying taxes on and let it go.

Jerry K. · Answer

@Kelley Moffat Not a problem. I've been doing this for years and I still miss rules and statutes.

Kelley Moffat · Answer

Thank you for taking the time to answer my question, Jerry.  You are correct - I bought the certificates last month for the 2019 taxes that were due in 2020.  I bought certificates in Maricopa, Pima and Yuma counties.  I certainly fell down in that part of my research...and now I'm wondering what other things are going to come up that I didn't know about!  Hopefully nothing too terrible.  Thank you again!

Ned Carey · Answer

@Jerry K. may have an answer

'17 '18 '19 tax lien certificates bought - can I foreclose in AZ?

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