New Trends in Tax Sales

by Chris on August 7, 2012

The current new “big thing” is the on-line tax sale auction. Its great for Sheriffs/tax collectors since it affords the widest possible participation to those who have computer and internet access.  The online also avoids the ordeal of a long physical bidding process, permitting the tax collectors employees to continue with their normal duties while the auction goes on. Unfortunately, the old fashioned local folks that used to go to the in-person auction are left out.

Famously, the initial online auction sponsored by the City of New Orleans actually was overloaded and provided erratic results for bidders.  Many bids were simply not accepted.

Now, any online tax sale auction can be “attended” by any entity, including national financial entities seeking the nice return offered by Louisiana’s 5% penalty and 1% per month return. This has brought fractional bidding to the fore,  where properties that were high dollar tax  amounts were quickly bid down to 1%.  As we have previously posted, a fractional bid is where a tax buyer pays the full amount of the taxes, but accepts only a fractional ownership interest in the property. So, this year it was reputed that over half the tax deeds in Louisiana were sold on a 1% basis to an out-of-state financially muscular bank. This kind of domination is only possible where online bidding is the norm, since it would be difficult to send bidders to multiple parishes and cities to participate in a physical auction.

Of course, these fractional bids pose problems for assessors who only want to generate one bill per property, regardless of fractional ownership. So, if the tax buyer’s 1% deed goes to sale the next year, it could be bid at 1% again and so on.  The good news, for lawyers, will be straightening out these highly fractionalized titles.

 

 

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