By Gilbert Bennet of? G Bennett 3 Investments and Andy Severino of ?http://www.neworleansrealestatenow.com
Louisiana is a great state for Tax Lien Investing.? I?m going to start with the basics here, Louisiana:
??Is a Tax Lien state
??Is a bid down state
??Has a 3 year redemption period
??Has additional 6 month period for advertisement and challenge to quiet title
Who sells property tax liens in Louisiana?
In most parishes in Louisiana, the sheriff is the taxing authority and the sheriff holds the tax sales, in New Orleans ? one of the state?s largest tax lien markets, the municipal treasury is the taxing authority and therefore responsible for the tax sale.
In many parishes tax lien auctions are held at a site determined by the sheriff and require you or a representative to be present, however, a growing number of parishes have been hosting their auctions online.? For better or worse, online auctions, where they take place, have significantly increased the number of participants in the auction, and, after some initial trepidation, increased the number of investors willing to bid less than 100% ownership for the taxes.
My buddy Andy Severino , a long time real estate investor and an active Realtor, wrote an article about investing in New Orleans Tax Liens, but it is so transferrable to the rest of the state, that I?m going to sample his article to answer many of the most common questions.
How does the bidding process work?
For Online Auction Parishes:
Anybody can bid on the tax liens as long as they were registered with Civic Source before the auction. The easiest way to do this is to set up a bank account in your user profile. It doesn?t cost anything to do so.
Once the auction opens bidders bid on a percentage interest in the property, should title pass to the winning bidder, rather than on how much they are willing to pay for the tax title. In other words, the amount paid by the winning bidder is equivalent to the delinquent taxes and penalties assessed for the tax bill, but the bidder willing to take the smallest interest in the property wins. And the earliest bidder wins, trumped only by a bid for a smaller ownership interest the property.
For In Person Auction Parishes:
The auctioneer reads the legal description and taxes + fees/penalties owed and then randomly selects a bidder from the interested parties.? If an individual not selected would still like the right to purchase that individual may offer a lower ownership interest and some real auction style bidding may occur.
How do I make money investing in tax lien properties?
In Louisiana any tax lien title holder is entitled to the following returns on his or her investment:
– A 5% penalty accrues immediately in favor of the tax lien investor on the full amount paid at the auction to acquire the tax title.
– An additional 1% per month is calculated? not only the amount paid at auction, but also on taxes paid for additional years.
-Annualized return=17% on first year, 12% on each additional year.-Additional 5% penalty for each subsequent years taxes paid.
-Your interest in the property is protected by state law as the tax lien takes precedence over all other liens,excepting IRS Liens, including first mortgages on the subject property.
What happens next?
The owner of the property has three years to redeem the tax lien by paying the taxing authority the full amount of delinquent real estate taxes, penalties and interest. The taxing authority then disburses the funds to the investor, or tax lien title holder.
If the property tax lien is not redeemed in three years, the investor can move forward with a court proceeding to ?quiet? the title, in which case when granted he or she would become an owner in the property, free of all existing mortgages.
There are more details involved in this process so consulting an attorney or reading the real estate law around tax liens in your state is a good idea.
By agonz October 14, 2011 - 6:42 am
Hi Joanne – I have a question. We recently bought a property at a New Orleans tax sale, winning the bid at 1% ownership (four others bid the same amount but we were in first). The property is bank-owned and was foreclosed upon back in 2009. However, the investment bank that owns the property never paid any of the property taxes because they themselves went under.
I understand that, after the redemption period, we can file to quiet title, but how would this work since the other party (presumably the bank) doesnt even exist as a legal entity anymore? any thoughts?
By Amanda August 26, 2011 - 9:46 am
Joanne,
Thank you so much!
I called the tax assessor’s office for Orleans Parish this morning. They referred me to the finance office.
A Ms. McMillian at the finance office informed me that there are NO tax overages from adjudicated property sales nor from tax lien sales. Both sales are regarded with differnt circumstances and procedures. Therefore, Louisiana does not have overages.
I guess I will be looking to start in another state. 😀
I appreciate you taking the time out to respond to my question!
Amanda
Metairie, Louisiana
By Amanda August 25, 2011 - 10:10 am
I am interested in researching getting started with Overages for the state of LA (and perhaps MS & AL). Is there anywhere you would suggest I begin to get the overage lists? Thanks for your consideration.
By Joanne August 25, 2011 - 11:57 am
Hi Amanda,
First you should know that Louisiana is a very different animal from the other states in the union. This is a result of Louisiana being a French colony and not an English colony – it’s laws and government are derived from French laws not English law as most of the other states. For example there are no counties in LA, they are known as Parishes not counties. Also they are neither a deed state, nor a lien state. They are something like a redeemable deed state, but they don’t refer to it as that. They refer to their tax sales not as tax lien sales but as “tax title sales.” There are many differences between Louisiana tax sales and tax sales in other states.
They also have something similar to a tax deed sale, but it is not called that. It is known as an “adjudicated property sale.” I’m not sure if they do have tax sale overages. To find out you would contact the Parish Assessor’s office and ask what happens to the tax overages from the adjudicated property sale, can the previous owner request the overage or does it go to the Parish?
Since the property has already been taken over by the Parish, there may not be any tax sale overages in LA, but I don’t know that for sure.