Real Estate

Is it worth buying utility links at Tax Sales?

Delinquencies other than property taxes may be sold at a tax sale. This includes unpaid utilities, sewer, water or garbage bills or any special assessments. Basically, any unpaid bill that is payable to the local government (municipality, township, county, or taxing district) and is not paid can be sold at the tax sale as a tax lien. As with unpaid taxes, the lien holder is in first position and can foreclose on the property if the lien is not redeemed within the redemption period. The lien holder also has the ability to pay subsequent utility charges (and even subsequent taxes) if the property owner does not pay them on time.

Many states give you the opportunity to pay subsequent taxes and charge default or maximum interest on your subs. The exception to this is Florida: Florida counties do not allow you to pay the back taxes and will sell the bond each year at the tax sale. So you don’t have that opportunity there, you just have to try to buy the link every year.

Utility links can be a good investment for a couple of reasons. First, the amounts delinquent on these liens are often less than the amounts on taxes, so you need less money to buy a utility lien than you do to buy a tax lien. And because these levies are smaller, institutional investors rarely bid on them, so they are slightly less competitive than larger tax levies. Second, when you own a utility lien, you can pay any subsequent taxes, as well as any subsequent sewer charges if the landlord doesn’t pay them. I have had some liens that I originally bought as small sewer liens, and then when the property owner stopped paying the taxes, I was able to pay the overdue taxes as well as the sewer amounts. This added thousands of dollars to my original link. Since this was a New Jersey tax lien, I was able to get 18% back on all my subsequent tax payments!

Buying utility liens is one of the strategies I use to keep my tax lien portfolio in double digits!

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