Indiana Tax Sale Gets ‘Out of Whack’
It seemed like a good idea back in 2002-2003: Replace the entire property tax system. That has put the Indiana tax sale in limbo right to this day.
Someday it will likely prove to be best in the long rung. But for now, there’s pain.
Before the Indiana tax sale system underwent change, taxes were assessed based on replacement value of a property. This was not a realistic figure in most cases.
Meanwhile most of America was on a true market/resale value system which is much more fair. So, Indiana set out to revalue all properties based on what they would sell for in the current market.
Every four years the properties would be “trended” to reflect new market values. At the time, values were thought to be only capable of rising further.
Assessments were ridiculously high on some properties, especially in blighted areas where assessments were sometimes 10-30 times true market value. Plus, the revaluing of properties took much longer than expected in most counties.
This resulted in delayed tax bills, and thus, delayed tax sales. Indiana tax sale dates were often canceled for several years while the mess sorted itself out.
In the meantime, properties that were barely worth 1-2 years’ worth of taxes in normal times, and usually sold at the Indiana tax sale, sat unsold.
They then accumulated 3-4 years worth of taxes during the confusion, making them worthless and completely unappealing to any tax sale buyers at the prices offered.
This phenomenon also had the unfortunate effect of placing the burden from the uncollected taxes on these properties onto the remaining homeowners and landlords in the area.
A typical result was that cities like Gary, Indiana had to raise their tax rates. So high in fact, that on many properties rents were barely able to cover the property taxes.
With annual market rents of $4000 – $5000 per year, taxes rose to in excess of $3000 per year. This made owning even a free-and-clear property in clean rentable condition, hard to profit from. Therefore nearly all properties of this type that were offered at the Indiana tax sale went unsold.
And, a vicious cycle of increasing abandoned properties and taxes on those properties that remained, continued.
Now that 2010 is here, trending (an attempt to again revalue properties) was once again completed late. It’s caused many counties to have 2-4 years worth of accumlulated tax-delinquent properties on their sales that formerly sold at the Indiana tax sale.
This won’t change the fact that many properties on this sale will now be worth less than the minimum amount owed. But consider the opportunity this will afford to us when we contact owners of mid-value properties ($20,000 – $100,000) offering to purchase.
Redeeming one year’s worth of taxes plus interest is often hard enough for these delinquent owners. The Indiana tax sale is unforgiving – no extensions.
But it’s even harder now – redeeming 4 years’ worth of taxes and interest will be nearly impossible for most. Required tax redemption amounts of $10,000 – $15,000 will be commonplace. Yet owners will still have some equity above and beyond this amount.
Smart tax sale investors at Indiana tax sales will be skipping the sale this year, and dealing with owners of properties in the mid-value range.
These properties will still likely have had tax liens sold against them this year. So get our early and approach the Indiana tax sale from another persective – using what you discover in my free “Underground Tax Sale Strategies” report.
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