Legislator Wants to Reduce Tax Sale Redemption Interest Rate

Alabama State Representative John Rogers (D. Birmingham) says the current system of tax sale redemptions is unfair to struggling property owners.  He claims to have support from several county tax administrators who agree with him. One county’s tax collector suggested an interest rate of only 5% to 6%.  Representative Rogers wants to go lower, and says he thinks 1% interest for tax sale redemption is fair!

To read the entire Birmingham News article by Jeff Hansen, click HERE.

If you are opposed to the reduction of the interest rate for tax sale redemptions, please contact your local state legislators as soon as possible. You might want to point out the high degree of risk associated with such investments, including:

  • The tax sale might be defective, leading to litigation and legal fees that cannot be recovered even the investor is successful;
  • If the property is occupied, the investor cannot eject the occupants until SIX MONTHS after the tax sale, leading to the risk of vandalism and stripping of the property;
  • Recent Alabama Supreme Court decisions allow the owner to redeem and regain possession by paying just the tax-related charges, forcing the investor to file a lawsuit to recover other legally-allowed charges such as insurance premiums and the value of preservation improvements;
  • Recent legislative changes modified the 3-year redemption period from 3 years after the sale (former law) to 3 years after the investor takes possession (new law.)  For occupied properties, this could extend the redemption period an additional 6 months (as the earliest date after the tax sale when you can file suit for possession) to as much as many additional years (however long it takes the investor to actually win a lawsuit for possession). This adds dramatically to the risk and expenses involved in tax sale investing.

If you can think of other risks that warrant a higher interest rate than 5%, 6%, or certainly 1%, please post a comment and share those thoughts with everyone, so the tax sale investing community can speak with a solid voice when talking to their individual legislators.  Just remember health care reform–no matter whether you were “fer it” or “agin it”, it’s a whole different matter to prevent passage than it is to attempt repeal afterwards.

If you need a link for the contact information for your state representatives and senators, click HERE. After you click, scroll down the left-hand frame until you see the place to enter your zip code. Do that, and you’ll be given the names of your senator and representative. You can then click on their names for their contact information.