Certificate purchasers can charge up to 18 percent in annual interest on the tax debt, which critics say can seriously burden people who are already struggling to pay their bills.
But tax lien sales ensure local taxing jurisdictions — including schools, municipalities and townships — get money they are owed, and property owners have ample opportunities to resolve their tax debts before they are sold off, said Paul Robinson, chief deputy Montgomery County treasurer.
“Our goal is not to sell a tax lien,” he said. “Our goal is to have property owners come in here and pay in full or sign a payment contract with us.”
The county began selling tax liens in 2005 to collect delinquent taxes. Treasurer Carolyn Rice said the sales are the second-to-last resort to force owners to pay their bills. Foreclosure is the last resort.
“It’s one of the tools we have, and we try to make the best use of it,” she said.
Under a purchase agreement, the county sells lien certificates to a private company for the full amount of the taxes dues.
The taxing jurisdiction is paid 100 percent of what is owed. The private company can then charge the property owners up to 17.5 percent interest annually on the unpaid debt, under the agreement with the county.
But when the economy tanked, interest in tax liens disappeared.
In November 2008, the county treasurer canceled the tax lien certificate sale because no company bid on a bundle of 650 properties, which owed $2 million.
Between 2008 and 2011, the county sold a combined 1,383 certificates for $4.3 million.
But in 2012, the market for liens bounced back, and sales nearly reached $6 million for 1,074 certificates. In 2013, sales exceeded $4 million for 1,078 certificates. Officials said 2014 was a decent year for sales and collections.
The county has a purchase agreement with Tax Ease LLC.
Property owners are notified that their delinquent tax bills are eligible for a tax lien sale, and many owners pay their bills or agree to a payment plan to avoid the sales, officials said.
Last year, delinquent taxes on more than 4,900 parcels were paid prior to the properties heading to a tax lien sale, with collections totaling about $16.2 million, according to the treasurer.
The county has modified its program 2011.
The county now has two sales per year instead of one, and it now negotiates with the buyer, instead of selling certificates simply in one bulk purchase, officials said.
The addition of a second tax lien sale each year provides the county with leverage to motivate property owners to pay their bills or face higher fees, Rice said.
“I always tell people not to feel sorry for anyone on that list (of tax lien sales) … because those individuals have ignored all of our outreach and they can remove themselves up to the day of the deadline by getting on a payment plan or paying off what they owe,” she said.
Tax Ease can file for foreclosure after three years if the property owner does not keep up with payments, officials said. So far this year, Tax Ease has filed to foreclose on dozens of properties in Montgomery County.
Some consumer advocates have criticized tax lien sales, saying they are highly profitable for companies at the expense of struggling homeowners.
The National Consumer Law Center said sometimes homes are foreclosed on and sold for nonpayment of tax bills that are just a few hundred or few thousand dollars.
In some states, the properties are sold for only the value of the back taxes owed, the center said.
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