Matthew Roth, of Allen Vellone Wolf Helfrich, & Factor, PC in Denver, has been practicing tax sales law in Colorado for at least 25 years, and has also worked with property developers and builders. He started in law as a real estate attorney – focusing on virtually all aspects of real estate including residential, commercial, and foreclosures. He also wrote a succinct and very informative white paper about Colorado tax sales. He recently joined Tax Sales Resources' CEO, Brian Seidensticker, for an in-depth podcast interview focused on Colorado’s tax sales.
An Overview of Colorado Tax Lien Sales
Colorado holds tax lien sales once a year in late November or early December, and the specific dates are decided by the counties. Participants are required to register in advance, registration requirements are the same for all counties, and registration opens approximately three to four weeks before the auction. All auctions are conducted online, and the format is a bid-up premium bidding process, although investors do not earn interest on the premium. The interest for tax lien certificates is based on whatever the federal discount rate is on September first of that year, and is rounded up to the nearest full percentage point with interest compounded monthly. The winning bidder has the right to pay subsequent tax amounts, and these subs earn the same rate of return.
Colorado Redemption Period
The winning bidder receives a tax lien certificate of purchase, and there is a 3-year redemption period. After those three years have passed, you can apply for a Treasurer’s Deed to try and secure the deed to the property, and a judicial foreclosure process is not necessary. It usually takes about six months after you apply for the Treasurer’s Deed for the county to issue it, but in some counties you can get a head start and apply for the deed before the redemption period ends. Those times and protocols can vary from one county to the next, so be sure to check with the county where you invest. Liens remain valid for 15 years, within which you can seek to enforce your rights to apply for the deed, but after 15 years the certificate expires. Check with the county to find out if you only have to initiate the deed application process during the 15 year timeframe, or if you must actually have the process completed by then. It’s also advisable that you check with the particular county regarding what nominal miscellaneous administrative fees they may charge.
How to Apply for an Insurable Title
If someone else buys a sub lien during the redemption period, that lien will be an encumbrance that you’ll want to resolve upon receiving the Treasurer’s Deed. The title you are given isn’t yet insurable, so you’ll need to quiet the deed to make your title marketable. An uncontested quiet title action generally takes between six and nine months. Or for a more expedient solution, you could use a quitclaim deed upon transferring the property to someone else – so that buyer will inherit your need to quiet the title. However, if you hold title for more than nine years with no claims against the property, title companies may be willing to insure it. To take possession, as the title holder, you need to file for eviction of anyone residing on the property.
Learn More about Colorado Tax Lien Sales
The Colorado tax sale process is pretty straightforward, but due diligence is still important, as always. For a more complete understanding of the nuances of Colorado tax sales, be sure to read Matthew Roth’s white paper, and listen to the full podcast interview with Brian Seidensticker.