The Tax Lien Process

Counties don't want liens, they want cash so that they can keep the government running. In the 7 county area each county holds an auction of the liens between late September and early November.

In Jefferson County, this auction takes place over a two day period at the end of October. The starting auction price is the original amount of the taxes, a filing fee, and an approximate $5.00 administrative fee. Each lien also incurs a premium charge. This premium is determined during the auction.

Each bidder is provided with a paddle with a number on it. On liens under $1000 bidding starts in $1.00 increments over the value of the lien. Over $1,000 lien value, bidding starts in $5.00 increments. Everyone who wants the lien puts up their paddle and the "auctioneer" counts one dollar on each paddle up to a $20 premium. At $20 the premium value starts going up in $5.00 increments. The counting continues until only one paddle is left up and that person acquires the lien. Average premiums during 1995 were about 7%. At any time, the person who owns the property can pay off the lien amount plus any interest. This can happen the day after someone else purchases the lien from the county. Which means you would lose 7% on your investment immediately. However, interest is paid on the first of each month. Since the Jeffco lien sale is during the last week of the month, you will probably get at least one months interest.

The following chart shows average time verses pay off :
Number of Months  Percentage of liens paid off
 6 33
 9 60
 12 70
 24 85
 36 95
 42 98

At the end of the next July, you have an opportunity to "endorse" any liens that still haven't been paid. This endorsement is the value of that year's taxes, the filing fee, and the $5.00 administrative fee. No additional premium is paid. You do not have to endorse the property. It will go back up for auction the following fall. If you don't endorse, you will still have a first position lien on the property that will continue to accrue interest until it is paid off.

The next July, you have the same opportunity.

The third July, you have the same opportunity and the real opportunity starts at this time. At this time you can also apply for a deed to the property. The deed transfer is put in a local newspaper and the current deed holders have six (6) months to redeem the full amount of the liens you hold. If they do not, the title passes to the lien holder.

Return to Investing In Tax Liens

This is a generally safe, though very long term investment. For a hard copy of the full proposal please send three dollars (to cover postage) to:

Kaim Chigh, L.L.C.
PO Box 1417
Golden, CO 80402
or call:
Click here for information on working with us to Purchase Real Estate in Expanding Markets.

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