Although I want to discuss Louisiana tax sales, I fully intended to sit down, put pen to paper and do a follow up on one of my last post by providing you with a collection of tax deed lien information for my home state of Louisiana. I cut my tax foreclosure sales teeth at Louisiana auctions but had never put together the contact information for all sixty four (64) parishes. I was just about to do so when my semi silence was broken by a local news alert teaser.
The local news station was informing the world that a parish government tax sale auction had broken all attendance records. Of course they were spinning the increased interest as a response to the downturn in the national economy, with desperate people seeking opportunity, when they left for a commercial break, but would have pictures and a complete analysis of the surge behind tax sale later in the broadcast. For a brief moment I thought I was watching a late night tax sale infomercial and waiting to see the number to call.
Of course anyone that has paid any attention to Louisiana tax sales knows that an auction can run the full gamut; from a couple of local guys telling the sheriff what properties they want with the entire sale being over before you could finish your cup of coffee to a multi day event that attracts many institutional investors and beaucoup smaller investors putting you to sleep.
Anyway you have to love news stations trying to drum up advertising revenue. The economy affects them too.
Over the years I have attended this particular Louisiana tax sale religiously. It has a good number of quality properties that make great candidates for ultimate ownership. It’s a rural parish that has a lot of urban development which allows for the purchase of acreage that has the added attraction of sub divisional opportunities on the back end after acquisition. As if any additional incentive is required. Quieting title isn’t much of an issue as property changes hands via title confirmation proceedings on a regular basis. It’s well traveled territory for the legal community.
Although the news station dramatically overplayed the issue, the sale did kind of take on a circus atmosphere. The place was packed and there were a lot of newbie investors that were using the research stat requirement sheets that come straight from the latest tax sale investing seminar.
The fact that newbie investors were in attendance doesn’t bother me in the least. In fact I encourage it. They don’t affect how I conduct my investment strategies. But with all the interest that has been generated over Louisiana tax sales (all tax sales for that matter) and the influx of new players. It does have an effect on the industry overall. Let me explain by first giving you a very quick overview of how tax lien certificate tax sales are conducted in Louisiana.
Louisiana conducts their tax lien certificate tax sales (as opposed to tax deed tax sales) using a process that is a combination of random selection and bid down ownership. Typical of a random selection auction, an auctioneer will read the legal description and the taxes owed, and then randomly select a bidder willing to pay. That’s usually the end of the matter and the auctioneer moves on to the next property. However, on occasion one of the bidders not recognized by the auctioneer may speak up and offer to take a smaller portion than the whole to satisfy the taxes owed and a back and forth bidding may ensue. For the most part bidding down the property is the exception rather than the rule. There is a kind of unwritten rule; there is plenty for everyone and really no need to pay full price for less property. But it does happen and depending on the parish more so in some than others.
If your investment strategy is to purchase tax lien certificates for the statutory interest because you see them as a more secure investment and a better producer than the typical low interest CD you could purchase from you corner bank, then the influx of competition doesn’t really affect you. Your pre sale research consists of making sure the property does indeed exist and that it‘s not a dual assessment. The ratio of the cost of the tax lien certificate to the value of the property secured by the tax lien is so grossly slanted in your favor that the risk of losing money is almost nonexistent. Sure you could purchase something that has an environmental issue like an old gas station that had sunken tanks that leaked. 50 years from now some attorney is going to name you in a suit because you tax lien certificate shows up in the chain of title and they are looking for previous owners to pay for clean up. If you plan your life like that stay away from gas stations, industrial sites and toxic waste dumps. Maybe you should avoid Louisiana tax sales altogether if your view on investing via risk is so temperamental.
Now, if you are trying to gain full ownership then you research is quite exhaustive as you are searching for those few properties that have a good chance of not being redeemed and uncontested when you bring you conformation action. Walking into a Louisiana tax sale that is a packed room, can send you into a panic attack rather quickly if you have not laid the proper ground work. When the sheriff/auctioneer calls out the first couple of properties and 50 hands go up to get acknowledged as the winning bidder. It really doesn’t look like an auction as far as you are concerned it’s taken on the appearance of a tax sale lottery. Here you are on the day that all those hours of research are going to pay off. You have narrowed your prospects to a list that consists of a half dozen or so tax lien certificates that have a good chance to hit you a home run. The only obstacle you have now to overcome is how to get recognized when all those hands go up when your number is called. While it may appear that you have just entered the Louisiana tax sale lottery zone and all your hard work is about to go down the drain. It hasn’t. There really isn’t any reason that you shouldn’t walk away from that tax sale purchasing everything you came intending to buy.
Your lesson is to think about the dilemma in which you find yourself. You’re at a Louisiana tax sale. You know what you came for. The question is how you are going to get it. I’ll fill you in on a later post.