Let me tell you about an investment opportunity Colorado county governments are required to offer. It’s called the Tax Lien Sale. Every year during October and November, all Colorado county treasurers offer liens on unpaid property taxes for sale at a public auction.
The county treasurers are obligated by law to collect as much of the annual authorized taxes as possible by year end. The tax lien sale is how they go about collecting the remaining few percent of unpaid taxes. This year, about $700,000 of taxes due remain outstanding for La Plata County.
As authorized by state statute, county treasurers “sell” these outstanding taxes at a tax lien sale or auction. Each year, the state sets an interest rate (simple interest, not compound) that county treasurers can offer to investors who purchase these tax liens in order to entice them to pay someone else’s taxes. This year, the interest rate is set at 10 percent. This interest is paid by the delinquent taxpayer, not by the county.
The minimum bid accepted is the amount of the delinquent tax, plus interest the county has charged the property owner and processing fees. All of that is returned to the investor, plus the 10 percent interest, when the delinquent taxpayer pays up. The investor is guaranteed a minimum of one month’s worth of interest.
As required by Colorado state statute, this auction happens between mid-October and early December in all Colorado counties. This year, the La Plata County Tax Lien Sale (or auction) will be from Nov. 13 through Nov. 16, closing at 5 p.m. More information, including what will be for sale, is available on the county’s website: http://co.laplata.co.us. The Durango Herald will publish the tax liens for sale, beginning in mid-October, each week for three consecutive weeks.
In recent years, many counties have migrated from hosting live sales where people come to a specific location, drink coffee, eat doughnuts and then bid on tax liens, to hosting them on a website. This works a lot like eBay. Thus this process promotes fairness to all bidders because you can now participate in many different auctions throughout the state without having to travel to the various counties. The auction website will link to La Plata County’s website, allowing you to view the properties you are bidding on while you are deciding what to bid on and how much you want to invest.
Remember, you are not bidding on the properties, you are bidding on the taxes owed to the county. But by looking at the properties, it can help you decide if investing in this taxpayer is a good idea: Is he or she likely to pay you back the principle (the taxes, penalties and interest owed so far), plus the 10 percent interest?
Online auctions are beneficial to the county in many ways. We are reducing our administrative costs because we no longer have to provide a room for the auction, close our office, spend days moving our equipment to and from the auction site, print out reams of paper to satisfy each bidder, provide you with coffee and doughnuts, and process your paper cashier’s checks for the amount of your winning bids. As you can see, there are real savings to the general public and taxpayers to be had. And, in addition, the Treasurer’s Office can make some money in this process, money that goes toward vital, valued county services such as road and bridge maintenance. How does this happen? Because this is an auction. Some investors will pay a premium to get a particular tax lien because they believe this particular investment is good. This is similar to trading stocks on the New York Stock Exchange. Some stocks sell at higher premiums than others.
Because an online auction is new for La Plata County this year, there are several information sessions available for your attendance. Webinars are scheduled for every Friday in October. The schedule for these webinars is on the county website, and is also available at the County Treasurer’s office at 1060 Main Ave. The webinars last for about an hour. You must register for these sessions. To sign up for one of these sessions, call RealAuction Customer Service at (877) 361-7325. Each Friday session is offered at a different time to accommodate different schedules. You can participate in these sessions in the privacy of your own home or office. All of these sessions are free.
If you would prefer to attend a live session rather than a webinar, we are offering these on Oct. 20 at the County Administration Building on 11th Street. Sessions will last an hour and you can “drop in” on the hour. A representative from Real Auction, the website host, and I will be there to answer your questions about tax lien sales and how to use the website. These sessions will be beneficial to those of you who have never participated in a tax lien auction. These sessions are also free. But please, do not expect coffee or doughnuts at this price!
Allison Morrissey is the La Plata County treasurer. Reach her at Allison.Morrissey@co.laplata.co.us.