Alabama Tax Lien Auctions

[Denise Evans]

33 Alabama counties have switched to the new tax lien auction system familiar to investors around the US.  No more of the arcane traps lurking in tax certificate and tax deed sales that can lose money for the uninformed.  In addition, 31 of those counties will have online auctions, making them available for investors worldwide.  Interest rates start at 12% and are bid down. If you are looking for some new markets, Alabama might be the place to look.  Judicial foreclosure three years after you purchase the tax lien and it has not yet been redeemed. In that foreclosure lawsuit the owner has one last chance to redeem plus pay your legal fees, otherwise the judge gives you the property and quiets title in you. 

[Will Sifert]

Originally posted by @Denise Evans:

How intriguing, @Will Sifert, what do you get if you win at a 20% ownership?  You now own 20% of the property unless the taxpayer redeems? What does the 20% owner investor get if there is a redemption? I guess if there is no redemption then the 20% owner files a sale for division and buys out the other 80% ownership interest?

Alabama bids down the interest rate all the way to 0%

 As someone who is looking to acquire property, I hate fractional ownership. Until this past year (2020 tax sale) I have managed to get 100% on all the properties I got from the tax sales. So everything else I am about to say isn't front first hand experience but from my research and reading the laws. From my understanding, if the property doesn't get redeemed you sue to quiet title like any other suit except you are only suing for the amount of ownership interest you have in the property ( this example, 20%). You win your suit and now you are a partner in common with the original owner (80%) me (20%). The best case scenario would be for one of us to buy the other out, but that would have likely happened before the suit to quit title. In most cases, I will likely be dealing with someone uncooperative or someone who can not be found. In that event, I would have to sue for what we call a partition by licitation. The property would be auctioned off and the proceeds would be divided up among the owners based on their percentage of ownership. So it just ends up being an extra step / suit in the process. The only thing I am unsure of, but I believe I will be reimbursed for the other parties part of the taxes I paid. I would have received the tax bills after the tax sale and would have had to pay the entire amount even though I was only a 20% owner. I think I can get back the 80% as expenses off the top before the proceeds are divided up.

No matter what percentage we get (1-100%) we pay the full amount of back taxes at the tax sale and we pay the entire tax bill for the following years. If there is a redemption we get all of our money back plus the interest on the whole amount. LA is a 5% initial penalty and 1% a month, so first year is a 17% return.