Government and Government Officers' Roles
Federal Government's Roles
The Federal government is funded primarily through income taxes and won’t play too large of a role in our tax lien investing.
State Government's Roles
The state government gets some money from income taxes, but also get a lot money from our state sales taxes. The state is important to us because the state largely determines how tax sales will operate inside that state. In most cases, they determine the following:
County Government's Roles
The county government primarily gets their money from property taxes and from the tax sale system. The counties might get a little money from the state and federal governments, but their primary source of income is property taxes.
Elected officials manage the county government and each plays a role in the tax sale process. Some of the officials that you may come across are:
Government Officers' Roles
The County Treasurer or Tax Collector
The County Treasurer’s duty is to receive and safely keep the revenues of all public monies of the county. They also invest the surplus funds. They distribute the monies collected to the property recipients and they pay the county’s bills as directed by the County Board.
So why is the County Treasurer important to a tax sale investor? First of all, they typically oversee the tax sale. They’re also responsible for the taxation of all personal and real property within the county. They send out the tax notices, delinquency notices, and tax sale notices. It is generally the treasurer that you need to contact if you want to buy a tax lien or deed over the counter or to get information about a potential investment.
The treasurer may also be given some leeway from the state with certain things pertaining to the tax sale. They may, for instance, have power over whether tax liens or deeds are sold after the auction. Some states have fairly loose laws so a conversation with the treasurer or tax collector may help get more insights.
The County Assessor
The county assessor is in charge of assessing a property’s tax assessed value. They go through and put a value on every piece of real estate within the county. They determine the value by considering both the county’s budget and also the fair market value of the real estate.
So why is the Assessor important to an tax sale investor?
Because the property records are typically stored with the county assessor. When you are researching potential investments, the property records will be important to you. On those records you would find images, values, addresses, sales history, property descriptions, etc. And, increasingly, that information is stored online on the county assessor’s website instead of only in paper form at the county office.
So how are properties assessed?
Properties are assessed using one of three methods:
Most Assessors use a computer assisted mass appraisal system to evaluate every property in the county, but let’s quickly go through each of those methods.
Fair market value has been defined as the price a willing and informed purchaser would pay to an unrelated, willing and informed seller where neither party is under compulsion to act. A good way to judge that value is by checking the prices of recent sales of comparable properties. That’s where we get the term “comps.”
Some people will use Zillow or other websites to get a quick look at comps or estimated property values. The key word there is estimated. Although Zillow has been known to be right on, it also can be off by quite a bit. So it’s good to get an idea from Zillow, but it shouldn’t be treated as absolute truth.
Where recent comparable property sales are not available, a cost based approach may be used. In this approach, the original or replacement cost of a property is reduced by an allowance for decline in value (depreciation) of improvements. Replacement cost may be determined by estimates of construction costs.
Using the income approach, value is determined based on present values of expected future income streams from the property. This may be used on farmland where crops produce revenues each year. So the assessor may choose to include potential income for that property as a source of property value.
Other Team Members
Most investors will invest in the same geographical areas year after year. That means that they develop a power team in each of those counties. The investor does not need to be an expert in every investing aspect in every county in the country. The investor need only become comfortable with a few states or counties that work for them and surround themselves with experts.
Let’s quickly introduce potential power team players and then we will go through each one.
The county official knows his or her county processes better than anyone. If you can develop an amicable relationship with the county officials, all the better. The best scenario is to create such good relationships that the county official calls you first to give you a shot at potential investments before the county releases the list publicly.
County officials can also provide insight into their systems and sale procedures. County officials and county workers are not allowed to invest in their own county because it would be considered an unfair advantage. They know a lot and they know the best ways to make investments in their county.
Create relationships with county workers and county officials in counties in which you would like to invest and use those relationships to profit.
Real Estate Agents
Having quality real estate agents on your power team serves a couple purposes. The first is to help with evaluations. Imagine buying a tax deed across the country without a way to personally evaluate the property. One way to get an educated guess is by getting one from real estate agents in the area of the property. This can be done by going to Zillow.com and viewing properties being sold near the one you’re interested in. Along with a description of the properties, Zillow will show who the agent is on those properties. You can then call the agent and make a simple request. Tell them you’re buying a property nearby that you would like to quickly sell and you would potentially like them to sell it for you. Ask them to take a look at the property and see how it compares to others in the area and what it might need to sell near retail price.
You may want to get a couple agents to quote it for you. Then once you invest in the area a few times and call back the agents that did a good job for you, you suddenly have a real estate agent or agents on your power team.
Real Estate Attorneys
When it comes time to foreclose on a property or when you need to clear a title, you may want the assistance of a real estate attorney in the area of the property. Real estate attorneys can help with foreclosure notices to financially interested parties and will represent you to those parties and in the court system to clear the title. It is your attorney that will appear before the judge to clear the title to have a warranty deed issued on the property.
Once you use a real estate attorney that you like and can trust, then you can stick with them whenever you invest in the area. That real estate attorney becomes a player on your power team and someone that you can call on for help when needed.
Real Estate Investors
A very important group of players for your power team are other real estate investors. You can find these investors through local real estate clubs, or through web-based real estate clubs.
You can use these investors as mentors, but more importantly, they are used to aid in your exits. While attending real estate clubs or chatting with other students, you might find out that one investor is interested in buying beat up homes to rehab and sell. You might also find another investor that likes to buy raw land and develop it.
Knowing investors in the area can be powerful because you can invest with those investors in mind. For example, you could speak to the one interested in land and find out where he or she likes buying land and find out specifically what he or she likes or avoids. And then you can find property specifically for him or her. Call the investor up and show images of the property and information on the property including historic values and the neighborhood and then work the deal before you make your investment.
Having other real estate investors can provide you with a constant stream of buyers for investments. You can reach out to form relationships and invest with the end in mind knowing that other investors are anxious for the deals that you can provide.
Property appraisers determine the value of a property. Sometimes those values are higher than anticipated and sometimes they are much lower. Having the right appraiser on your power team is very important to get the right evaluation on your investment properties. It’s important to have accurate values in case you would like to take money against the property or would like to sell the property.
This is especially important for investors that have spent time and money rehabbing the property. The investor needs to get a new appraisal after the work is done otherwise the investor hardly has ground to argue a higher price than what was most previously appraised. Once you find an appraiser that provides good and accurate results, hold onto them and call on them in the future as a new member of your power team.
If you would like to perform extensive rehab on a property, you will need the assistance of a contractor in the area. A contractor will perform work and source professionals to get your rehabilitation done well and on time. Having an honest contractor that can stay under budget and can get the job done inside the deadline is a great asset. Once you find one in the area, hold onto that contractor and go back to him every time.
Finding these power team players can be very simple. It can be done by searching the Internet for that particular skill set. For example, google “real estate attorney pima county, az” or “property appraiser hernando county, fl.” You can also find players through other tax lien and deed investors that have invested in that area.
One last note. Don’t worry about finding all of those people before you need them. When you get to the point where you need a new appraisal, then find an appraiser. Don’t worry about it beforehand.