All Forum Posts by: Abdenour Achab

First, a disclaimer. I have some experience (so far unsuccessful) in Arizona tax lien sales and zero experience in Alabama tax lien sales. So, what I am going to write below is based mostly in just reading information online.

The Alabama's relatively new tax lien systems is very similar to the Arizona tax lien system. They are both interest bid down states. Alabama starts at 12% and Arizona starts at 16%. If you are trying to acquire a modest residence worth at least $50,000 as is in a county that holds online auctions (which is the point of view I adopt in this whole post), double digit interest rates are not an option. So, there is no difference in starting at 12% or 16%. Here are the major three pros of each state as I see them.

A) Alabama Pros = Arizona Cons:

A.1) No Excess Proceeds sale option.

   Let's say you start a foreclosure on a vacant house in Alabama worth exactly $50,000 as is, whose owners of record are dead, and whose true owners are ten heirs who live out of state and don't like each other very much and are not savy real estate investors. The odds are, none of them will redeem the lien. You will be able to acquire the house for a total cost of about $15,000, and either wholesale it for a $30,000 or so profit, fix it up to rent it out or move into it yourself. Also, a savvy investor who sees your foreclosure notice may decide it's too much of a hassle to try to secure quit claim deeds from all heirs and still make a big enough profit from the sale to bother. On the other hand, in case of a similar situation in Arizona, the odds are one of ten heirs will ask the court for an Excess Proceeds sale, and all you will get back from that sale is the $15,000 you had spent.

 Maybe even any lien holder can ask for an Excess Proceeds sale. In which case you will lose out if any lien holder asks for an Excess Proceeds sale.

 I expect to be able to report on this Excess Proceeds calamity from personal experience by the end of 2027.

A.2) Proximity to where you live, if you live east of the Mississipi river.

 Even if you buy liens online sight unseen like I do, at some point, before subtaxing or paying a lawyer to foreclose, it's probably a good idea to go see the property in person. I find it less annoying to drive less than one thousand miles each way in my SUV once every other year, and house and pet sit along the way, to visit properties than to fly and rent a car. Likewise if you luckily end up with a nice enough house to move in yourself.

A.3) I don't know yet. Maybe you can pitch in for the third advantage if you read about it or have personal experience with Alabama.

B) Arizona Pros = Alabama Cons:

B.1) Bailout By A Greater Fool in some counties.

In some Arizona counties, if you buy sight unseen a tax lien on a house that looks decent on Zillow, Google & Cie, then, when you go see the house, you find a burned down pile of carbon sitting a very low value lot, you can simply not subtax. When a greater fool decides to buy a tax lien at the subsequent year sale, the county will ask him to pay the taxes for two years. Including the year for which you bought the lien. And you will get your investment back, plus interest. Not all Arizona counties do that. But some do. It seems like that's not an option in Alabama. It seems to me like if you buy a lien on a dog in Alabama, you will eat the loss.

B.2) Nicer weather in Arizona:

If you succeed in acquiring property, you are bound at some point to spend some time in that state. I suspect most people would prefer Arizona weather to Alabama weather.

B.3) Proximity to where you live, if you live west of the Mississipi river.

On balance, I don't know which one is better. The real issue is how bad is the Excess Proceeds sale novelty in Arizona. I think it will be hard to tell, even after losing some properties to such sales. Because, even if you lose one, who's to say that, if there was no Excess Proceeds sale option for that property, a savy investor wouldn't have seen the foreclosure notice, contacted the owner(s), convinced them to sell to him at a low price, then redeemed that property. In which case you would have gotten only your investment back. Excess Proceeds sale or not.

Last year, when I bought those liens, that county listed about 3,700 parcels on whom to sell liens. My guestimate is that 500 to 1,000 of those properties were livable homes.

The vast majority of those homeowners were only one year behind on their property taxes.

There is no real money to be made from redemption of livable homes in Arizona though. The competition is so fierce that it drives the interest rates too low. I bought many liens at 0% interest rate. Some at 1% per year. Many at 2% per year. Many at 3% per year. I suspect my average interest rate was between 2% per year and 3% per year.

The only real money to be made if you bid on tax liens secured by livable homes in Arizona is in a non redemption. That's why the new law about defendants ability to request an Excess Proceeds sale is leading me to question whether it's still worth bidding on tax liens secured by livable homes in Arizona.

I will know the answer to that question by the end of 2027.

150 liens on good properties (the other 9 or so were mistakes due to lack of due diligence) have already turned into 46 in just a year. I expect those 46 to turn into 23 by the end of June, once most of the homeowners have received their first first class mail letter from me.

Now, the TLDR version of my previous post:

"Exit Strategy" is a big word for what I am trying to do: acquiring a modest home in rural Arizona at a cost of:

1) About $15,000 in cash.

2) Tying up another $200,000 four nearly four years at very low interest rate return.

@Bruce Lynn , 

Every situation is different. Let me start with your second question:

> Can you sell desert lots.

Not sure. Alone, no. With the help of a real estate agent, maybe.

> What is the exit strategy on them?

48 exit strategies are too many to list. Let me start with the two that I don't plan to subtax. If and when I find out that the treasurer's office received money through someone else, whether through redemption or by selling the lien at the February 2026 tax lien sale, my strategy is to send the original certificate back to the treasurer and, when I receive the redemption money, mobile deposit that check into one of my bank accounts.

For the other 46, I fully expect 40 to 45 of them to be redeemed before foreclosure. My exit strategy is similar to the above.

My hope is to acquire one or two properties out of the 46.

If a property is worth more than $100,000 and is in ready to move in condition for a confirmed bachelor, my "exit" strategy is to turn it into my home.

If a property is worth less than $100,000 or needs significant rehab and is vacant, my exit strategy is to sell it to someone able and willing to rehab it.

If a property is worth less than $100,000 or needs significant rehab and is occupied, my exit strategy is to ask the occupant(s) to rent it from me and, if they say no or fail to pay rent, evict them and sell it to someone able and willing to rehab it.

PS: There is more in rural Arizona than undeveloped vacant desert lots.

An owner (or former owner) requesting overages in South Carolina or Texas won't prevent you from getting the property at a discount.

Under the new Arizona law, an owner requesting Excess Proceeds before the foreclosure is finalized will prevent the tax lien investor from acquiring the property or making any profit besides the generally very low interest.

I am worried that might even happen if a junior lien holder requests such excess proceeds.

To make things worse, when the 30 day notices are sent to the homeowner, they need to include a statement regarding their right to ask for excess proceeds. That's how I found out about the new law in Arizona. Yesterday morning, I asked my lawyer to send 30 day notices to a homeowners for whom the three years redemption period has expired. Later that day, my lawyer emailed me copies of the 30 day notices. They did refer to that right, including the Arizona statute number. That's how I found out about the new law.

Hi @Will Sifert,

If I remember correctly, about a year ago, you went crazy in some Colorado county and bought about 200 tax lien certificates.

How long ago was that?

How many of those tax liens do you still have?

Of those, how many do you believe are worth subtaxing and paying for the foreclosure cost?

When will the redemption period expire?

I suspect the only way to find out whether buying tax lien certificates at an auction is worth it is to go big like Will Sifert did. 

I too went crazy in a rural Arizona county a year ago and bought 159 tax lien certificates. Of those, I have 48 left. 46 of which I plan to subtax (NOT 47 like I stated in a separate thread). Two years, plus foreclosure time, remain the redemption periods. 46 are the ones I believe are worth subtaxing and paying for the foreclosure cost.

> not everyone and maybe even a small fraction will probably try to solve their problem based on the law you quote.

I hope so. But it does give an easy way out for busy out of state heirs who don't want to deal with organizing with other heirs to redeem the property, put it on the market and split the proceeds. Maybe even give an easy way out to junior lien holders if the law allows them, as defendants in the foreclosure lawsuit, to request an Excess Proceeds sale.

My current thinking is this: I currently own 47 tax liens in Arizona that I plan to subtax, on properties for which owners haven't paid the 2022 property taxes, and for which only two years (plus foreclosure time) remain in the redemption period, and that I plan to subtax. If, out of those 47 tax liens, I don't acquire at least one property worth more than $50,000 as is by the end of 2027, I will stop buying tax lien certificates in Arizona. And I won't buy in any other state that has a similar Excess Proceeds provision.

I believe many people in this forum have never bought a tax lien certificate at an auction. If you are one those, the MAIN question in the present thread is not for you.

I believe many people in this forum have stopped buying tax lien certificates at auction before 2023. If you are one of those, the MAIN question in the present thread is not for you.

The MAIN question in the present thread is specifically for people who:

1) Bought at least one tax lien certificate at an auction in 2023.

AND

2) Have since decided to no longer buy tax lien certificates at an auction.

If you meet the above two conditions, please state the main three reasons you have decided to no longer buy tax lien certificates at an auction.

The reason I am asking is this. I have just found out a couple of hours ago about https://www.azleg.gov/ars/42/18204.htm. The TLDR version of that web page and other related web pages is that, in Arizona, if you start a foreclosure action against a homeowner who has equity of more than $2,500 in his house using a tax lien certificate, the "defendant" can ask for excess proceeds during the foreclosure action. If he does, and the court finds that such request is reasonable, a "qualified entity" (such as a bank) will conduct an auction, and the owner of the tax lien certificate will only recoup his costs and interest.

From what I read in the present forum, the above problem is now present, or in the process of being made law, in other states as well.

Now the MAIN question

If you have stopped investing in tax lien certificates after 2023, was the above one of the main three reasons?

The other questions below are for everybody.

I have assumed for several years that, if I hold a tax lien certificate on a house with equity, and the owner can easily be located, as soon as my lawyer starts a foreclosure action, if the owner didn't have the means to redeem the certificate, shrew investors would contact that homeowner, offer him some cash for his equity, then, once such an investor acquires the property, he will redeem my tax lien certificate, and all I will only get back is some of my costs plus interest.

I haven't had the time to digest the implications of https://www.azleg.gov/ars/42/18204.htm yet. But, at second brush, it seems to me like the only properties for which an owner would ask for excess proceeds were the properties I was going to lose to shrew investors anyway. So, the new laws about excess proceeds won't affect me. It seems to me like, both before 2023, the only worthwhile properties I might acquire by foreclosing on a tax lien certificate are the ones where the owners of record are dead or hard to find, and underwater properties.

How about now? Do you know who the "defendant" is in Arizona Revised Statutes 42-18204? Is it just the homeowner? Or is it any defendant named in the lawsuit, including judgment holders?

If it's just the homeowner, it seems to me like, against before having the time to fully digest it, this doesn't change anything. I will still only have a shot at underwater properties and properties for which the owner of record is dead or hard to find.

But, in a tax lien foreclosure action, all existing lien holders, including judgment holders, are also defendants. Can they ask for excess proceeds, resulting in an auction in which I would only recoup my costs plus approximately 0% in interest? If so, it seems like they would restrict the pool of gems to only free and clear (other than for the tax lien) properties for which the owner is dead or is hard to find.

Are there any interest rate bid down states that don't have in their laws provisions similar to https://www.azleg.gov/ars/42/18204.htm as they relate to excess proceeds stuff?

>  3) Once Trump starts running the presidency from prison and there is nobody minding the store in the White House, if my buyers are caught partying in the Lincoln Bedroom, will they

>  3.a) Be arrested and charged with burglary?

Oops ... I mean to ask will they be arrested and charged with breaking and entering.

I want to sell the White House to two acquaintances (husband and wife). Since I am not 100% sure that I actually do own the White House, I want to use a Quit Claim Deed to make sure I am not doing anything illegal.

My questions:

1) Where can I find an example of a Washington DC Quit Claim Deed?

2) Where can I find the legal description of the White House?

3) Once Trump starts running the presidency from prison and there is nobody minding the store in the White House, if my buyers are caught partying in the Lincoln Bedroom, will they

   3.a) Be arrested and charged with burglary?

   3.b) Be arrested and charged with trespassing?

   3.c) Not be arrested at all (based on the color of title that my QCD will have provided to them), and will Trump have to evict them after proving to the court that my buyers don't actually have title to the White House?

4) How would the answers to 3) change if the White House was located in Arizona instead of Washington DC?

I chose Tucson, Arizona as the location since Question 4 is really the most important to me.