A Change that Could be Coming to Your Local Tax Sales

2020 has been a year for unpredicted surprises and, to be honest, a lot of them have not been particularly pleasant. When you start off the spring with a global pandemic, the outlook often does not improve over summer and fall. However, as COVID-19 becomes a part of our daily lives, affecting how we work, play, and invest, we are seeing new trends emerge that affect how real estate investors do business. One of these changes could take place at your local tax sales, and it’s not all bad.

While there are many programs in place at present to help people avoid eviction and foreclosure due to property tax delinquency, the tax-sale inventory is still accumulating. As long as there are property taxes, there will also be delinquent property taxes and local governments trying to figure out how to collect on those overdue accounts. Thanks to COVID-19, most on-site auctions have been postponed indefinitely. However, many counties are announcing that if they cannot conduct tax sales on the courthouse steps, they will take the tax sales online.

For example, in Pike County, Alabama, the county revenue commissioner recently announced that his department will follow the lead of other counties in the state and conduct online tax lien auctions instead of enforcing evictions and tax deed sales. This change in process allows bidders to purchase the liens on the properties rather than the properties themselves by bidding down the interest rate they will accept on the debt. In Alabama, that rate starts at 12 percent, but in many states it is far, far higher. Once the debt is purchased, the property owner can bring the current year’s taxes current and satisfy the lien holder’s interest in the property or, after a grace period, the lien holder may foreclose. In many cases, lien holders generate extremely profitable results by working with homeowners to keep them in the property, and many experts hope the shift away from tax sales to tax lien auctions will help prevent foreclosures and evictions during this time. The move is also good for local governments who desperately need the funds a tax lien auction can bring.

In Troy, the revenue commissioner observed, “We have…listened to what other counties are saying, and they are satisfied with the tax lien auction and sale. The tax lien auction will be in the best interest of both the property owner and the tax lien purchaser.”