Bidders snap up liens on Pitkin County properties
Glenwood Springs, CO Colorado
ASPEN, Colorado – Thirty-seven bidders jumped at the chance to pay somebody else’s property taxes Thursday in Aspen, at Pitkin County’s annual tax lien sale.
The county treasurer’s office offered up liens on 88 properties, down from 333 last year, including one railroad car that did not include land, a handful of mining claims and a couple of Aspen parking spaces.
All of the properties were spoken for by the time the bidding was finished, and $514,634 worth of delinquent taxes were paid within the required two hours after the sale.
The list of property owners who were delinquent in their tax payments initially numbered more than 200, but was whittled to 88 in the weeks before the sale, as owners came in to the treasurer’s office to pay up.
Twenty-five so-called “premium” properties, those with delinquent payments of more than $5,000, generated fast and furious bidding at an auction among a handful of big players – individuals who shouted out bids for hundreds of dollars on various properties.
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The highest bid was $1,250 for a $54,501 lien. The delinquent property owner was listed as Starwood R79 LLC.
The attraction is the ability to make money once the property owner does pay up – 10 percent is the interest rate set by the state this year. The interest accrues annually; if a property owner pays the tax bill six months from now, the lien holder would get half of the annual interest earnings.
The rate is down from 15 percent two years ago, but it’s still considerably better than an investor can get at a bank, noted local resident John Werning, who wound up bidding on just one delinquent property this year. His profit depends on how quickly the tax bill, of about $1,200, is paid. He will get his investment back, plus the interest.
“The interest rate is more secure than the stock market,” noted one investor from Arizona, who declined to be identified.
And, an investor who pays the taxes for four years can seek the deed to the property and assume ownership, though that rarely occurs in Pitkin County, according to the treasurer’s office. The odds may be slim, but the chance at a treasurer’s deed on a Pitkin County property (mortgage debt is wiped clean as part of the conveyance) makes the county’s tax lien sale attractive, bidders say.
“Around here, chances are, it’s worth something,” said bidder Gaines Norton of Basalt.
“It’s pretty hard to imagine anything in Pitkin County is going to be crap,” agreed David Wyman of Denver. “In other counties, you have to know what you’re doing.”
For properties with a delinquent tax bill of less than $5,000, a round robin-style of bidding took place. Each property was assigned a number, as was each participating bidder. The first property was offered first to bidder No. 1, who could either accept it or pass. A pass sends it to bidder No. 2. If it’s accepted by the first bidder (it was), property No. 2 is offered first to bidder No. 2 and so on.
The premium properties were auctioned off in open bidding, with investors offering bids on each tax lien, though they’ll earn interest only on what’s due in taxes, not their “overbid.” The overbids totaled $10,030.
Wyman, who invests on behalf of a family LLC, said he spent $37,000 at Thursday’s sale. Over the course of 24 years, he estimates he has participated in tax lien sales in half of the counties in Colorado, and has wound up owning 24 properties at one time or another by paying the delinquent taxes, though he’s never acquired the deed to one in Pitkin County.
“Most of them I’ve sold, and they’ve sold pretty easily,” he said.
Bidding for the liens of less than $5,000 is a pretty sure bet in terms of an investment, said several participants at Thursday’s sale. The premium properties present a bigger risk, as a high overbid can eat up all of the interest earnings.
With the recent economic downturn, Wyman said he’s noticed property owners are slower to pay off their delinquent taxes.
“You get more interest, but it leaves you with less to buy with,” he said.