Are you aware that you can sell your tax liens? Selling, also called assigning, tax liens offers Massachusetts communities an alternative to the Land Court foreclosure process. This provides the tax collectors with the option to receive immediate revenues on the liened accounts and avoid the need to eventually take these properties to Land Court to recuperate the tax revenues that are owed to the communities. Under this alternative, a community can set up a tax lien auction in which investors will bid on the outstanding tax liens. When the community assigns the right to the selected bidder per MGL Ch. 60, Sections 2C & 52, they can receive the full balance that they are owed at the time of the assignment. Going forward the assigned company will have the right to collect any additional interest that is earned in the collection process.
The steps involved in a tax lien sale include: developing a list of liens to sell, advertising the auction (including the list of liens) in the newspaper and at least two other public places, notifying all leined properties included in the auction. Then through the bid process the community will collect, review, and award the winning bid to the assignment company. Once this process is announced, communities have found that the liened taxpayers will often approach the tax collector prior to the auction to make payments or develop payment plans in order to avoid having their lien sold. Communities are likely to see a positive impact from informing people about impending collector’s deed sales.
While the community performing the auction will see the benefits of increased delinquent tax revenues with a reduced administrative burden, there are also costs to consider. The primary cost to the community is losing the 16% interest accrual on the tax principal that will be sold, moving forward from the sale date. All interest previously accrued will remain with the municipality following the sale (unless there is an agreement to discount the tax lien sale amount by up to 50% of the accrued interest to date). There are also political concerns revolving around the bulk sale of tax liens, due to a fear that the investors will immediately initiate foreclosure on the liened properties. This is not likely the case as the investors are primarily concerned with accruing the interest revenue on the tax principal that they acquire in the sale, and less concerned with the real estate business aspect. The risk and potential for foreclosure remains constant regardless of the tax lien owner.
This option may not be the best strategy for every Massachusetts community, but the option is there and has worked well for some in the past. For more information please call Melanson Heath at 1-800-282-2440.