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Kem and Donna Moody bid on a parcel at the annual auction of tax-delinquent properties outside the Morgan County Courthouse on Tuesday.
Daily photo by Emily Saunders
Kem and Donna Moody bid on a parcel at the annual auction of tax-delinquent properties outside the Morgan County Courthouse on Tuesday.

Bidding for a 12 percent return
County property tax auctions draw investors from across country

By Sheryl Marsh
smarsh@decaturdaily.com · 340-2437

“Going once, going twice — sold to No. 29!” said Morgan County Revenue Commissioner Amanda Scott as she conducted an annual auction of properties with unpaid taxes last week outside the courthouse.

Three years ago, out-of-town investors started coming here to bid on property being auctioned. They came again for Tuesday’s sale.

A 12 percent interest rate draws them, as well as local residents, to the property sale each year.

After a property is sold, the original owner has three years to reclaim it, but must pay 12 percent interest to the buyer on the purchase amount.

“That’s one of the reasons I think the sales are popular with investors,” Scott said. “There aren’t many banks paying 12 percent interest.”

A local bank employee said the highest interest rate on a certificate of deposit there is 5.15 percent.

At the auction, the total cash paid for 75 parcels was $569,000. Most were residential properties.

By law, Scott and other revenue commissioners throughout the state, including Limestone and Lawrence counties, must hold the auctions each year.

Roger Becks of Birmingham, who bids for a Philadelphia company, came to the Morgan sale last year and was there again Tuesday. He bought 22 parcels for more than $300,000. His lowest bid was $715, the tax bill for one of the properties. His highest offer, $40,000, got him the parcel.

He said the purchases were solely for profit from the interest.

“In essence it’s like a mutual fund investment,” said Becks.

Other investors came from Atlanta, New Jersey, Texas and Nevada.

Although Becks paid for the property, the company he works for will not get tax deeds until three years are up.

“Many of those properties will be redeemed in the next couple of weeks, and you have no idea how many it will be,” Becks said.

Scott explained how the process works.

“Bidding begins with the tax bill amount and goes up from there,” she said. “The property owner may pay taxes owed on the property up until the bidding starts.

“Then they have 10 days after the sale. They can pay the tax bill plus a $5 fee. After that they have up until three years to redeem the property. The downside to that is they will have to pay a lot more to redeem it because of the 12 percent interest.”

Scott said a state law limits the interest a buyer may earn. If a person bids more than 15 percent of the property’s value, he won’t earn interest on the excess.

“For instance, if the appraised value on a property is $100,000, they would earn interest on a bid up to $15,000. No interest would be earned on an amount above $15,000,” she said.

Ten days after the tax sale, Scott forwards excess money from the auction to the County Commission office. She keeps the tax payment only.

“We’re actually collecting the same amount of tax, and that’s all this office is interested in,” said Scott. “The excess goes to the commission office.”

The commission office holds the money for 10 years. If property owners go to redeem their property during the three-year period, they may go there to claim the excess money that the buyers paid. To redeem the property, they would go to Scott’s office and the interest would be added to the redemption amount.

Deputy Administrator Carol Long said the money that comes to the commission office goes into an excess-tax fund. Last year Scott’s office sent $704,000 to that fund, and Long said the commission office paid $354,755 to property owners who submitted claims. Currently, that
fund balance is $515,931, Long said.

The process works the same in other counties.

Lawrence County Revenue Commissioner Tommy Praytor had the property tax sale there April 23.

“We had about 31 parcels,” Praytor said. “We give the property owners two hours after the sale to redeem the property with cash, a cashier’s check or money order.”

Praytor said Lawrence didn’t have any out-of-town investors.

The lowest bid was $22, and the highest was $5,000.

Limestone County Revenue Commissioner Brian Patterson said his tax sale will be May 15.

“We have about 100 parcels, and the crowd each year fluctuates,” said Patterson. “We usually have between 40 and 50 bidders.”

Scott’s number of parcels dropped from 130 last year to 75 this year.

“We’re glad to see the number decrease,” Scott said. “That’s a low number considering that we have 60,000 parcels for which we collect taxes.”

During Morgan’s auction, the bidders sat in chairs outside the second floor of the courthouse. Each one held a number.

Alicia Gregory, who moved here several years ago from Louisiana, attended for the first time with her mother.

They didn’t buy a parcel, but said they enjoyed it.

“It was an experience,” said Gregory. “It’s something we would do again.”

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