Buying a delinquent property-tax lien isn’t tough. Buying the right one is.
“It’s not very difficult to go into this on a small scale,” said Wyatt Yates, vice president at Farrell-Roeh Group in Littleton.
“If you’re retired and in your spare time, it’s not too bad,” he said. “But like anything, you have to do your homework or you could get caught losing your money. A lot of people try it and aren’t around in a couple years.”
The devil, as it’s said, is in the details and knowing how Colorado’s tax-lien-auction process works.
First, don’t do it with the expectation to get a property at fire-sale prices. It hardly ever happens, and when it does, the properties are often junk.
Several Colorado counties contract with , a Florida company, to run the lien sale. Bidders can register and must have a funded account to pay for any winning bids.
Other county treasurers run the sales at their offices, much like a regular auction.
Bidders offer a dollar amount, called a premium, that they’re willing to pay for the right to collect a lien. If successful, they will pay the county taxing body the value of the lien as well as the bid amount.
By law, winning bidders can collect a statutory annual interest rate — this year it was 10 percent.
In Denver, the average time for a property owner to redeem a tax bill is about nine months. That means buyers can likely bid as much as eight months of interest and still make a profit that first year.
Of course, if a property owner pays the lien just after the sale, as often happens, the bidder loses money.
Winning bidders can apply for a treasurer’s deed — basically foreclosing on the property — if a lien remains unpaid after three years. Lienholders can foreclose any time up to 15 years after the original auction and still collect interest on the lien.
