Tax Sales Increasingly Outsourced to Private Companies

Private Companies Taking Over Tax Sales

Responsibity for Tax Sales Now Often Contracted Out

More counties are outsourcing their tax sales to private companies. This has some definite implications for us as investors.

Whereas government often doesn’t have an incentive to create efficiencies, private companies do. As a result we’re seeing greatly enhanced information access almost immediately when a private company is brought in to do tax sales.

This USUALLY makes it easier for us to obtain the information we’re looking for about upcoming tax sales. An exception can be when the private company collects information and hides behind their private status to deny public record requests.

For the most part, this has not proven to be an issue.

Improvements To Tax Sales By Private Companies in Indiana

For years, many Indiana tax sales have been run by a company called SRI out of Indianapolis. SRI developed the proproetary software that tracks the status of properties offered or sold at county tax sales in Indiana. They also hold the actual auction itself onsite in each county.

SRI has also conducted online tax sales (usually second-chance commissioner’s sales) and developed an ebay-like auction system for those sales. It’s quite good, complete with proxy bidding. This allows you to set a maximum bid you’ll pay, but only pay slightly above the second-highest bidder.

Finally, SRI’s website gives stats for completed tax sales and allows for download of upcoming sale lists.

The stats are very useful for determining which counties had significant activity the year before and are therefore prime targets for pre-redemption period purchases.

Another company, Government Utilities Technology Service (G.U.T.S.), has entered the scene of late, and appears to be developing excellent online resources as well.

Significantly, they have been awarded the contract for Marion County tax sales (Indianapolis). This is the county with the highest tax sale activity in the state.

G.U.T.S even posts the bidder lists from tax sales on their website. Amazing the access that is granted to tax sales when there is no conflict of interest, as with the county.

Tax Sales: Blunders and Other Concerns with Private Companies

You may want to take note when a brand-new private company is awarded a contract to perform a sale in your target area.

Onyx, a Valparaiso company hired by Lake County, Indiana to perform tax sale work in 2010, failed to cause the appropriate notices to be filed in local papers as required by law. As a result, the tax sale conducted they conducted had to be totally reversed as a result.

Millions of dollars had to be refunded to tax lien investors, and all of their efforts to participate in the sale were wasted. I wrote about that in a previous post.

Another concern with private companies is that they will become the sole custodians of what should normally be public information (tax sale results). They could then potentially share this data only directly with the counties. This could make our job of obtaining records of tax sales more difficult.

Costs

Finally, when private contractors are paid by the parcel to run a sale or earn a commission, the fees borne by the county can be quite high. A relatively small county in Indiana, Boone County, recently paid G.U.T.S. $70 per parcel for a total of $16,030 to conduct their tax sale.

This seems to indicate that 229 properties were offered at the sale.

Responsibilities of private companies usually include providing initial notice by certified mail for each owner involved in the sale, arranging for publication of notice as required by law, conducting the actual sale, and providing software necessary to track status of the properties in the sale.

For smaller sales where several hundred properties are offered, these rates seem somewhat within reason. But larger counties would pay up to $770,000 or more for tax sales to be conducted privately. Lake County, Indiana for example has recently had tax sales where more than 11,000 properties were offered.

SRI was recently awarded a contract to perform a tax sale in Lake County in which a 10% commission on all proceeds were paid over to SRI. The amount of taxes being offered? $48 million!

Do you think you could remember to place the required newspaper ads if you were awarded a contract for $770,000 or a share of $48 million?

You’ll learn several ways to profit from tax sales in my Underground Tax Sales Secrets report, which you can get below for free.

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