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Expert Interview with William Hereford on the Alabama Tax Sale Process

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Tax Sale Resources
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Click to download the full white paper about the Alabama Tax Sale Process by William Hereford of Burr & Forman, LLP.

Introduction

William Hereford of Burr & Forman explains the tax sale process in Alabama in both his white paper statutory review as well as a full interview with Tax Sale Resources’ CEO, Brian Seidensticker.  There are two types of tax sales in Alabama which are land sales and lien sales.  Hereford covers both in the information.

Definitions of both sales:

The lien sales are a new system first offered in 2019 and counties across the state are slowly adopting this system of collection.  It’s important to note the differences and ensure you inquire with the county as to which is used.

  1. Land Sales=county sells the taxpayer’s land to pay for the taxes.  “The purchaser obtains an interest in the property sold, evidenced by a certificate, which a certificate may later be exchanged for a deed to the property.”
  2. Lien Sales=county sells the county’s lien against the land for the taxes owed. “The purchaser at the sale obtains a lien on the property that can be foreclosed after three years.”

Definition of redemption periods:

Unlike other states, there are two types of redemption periods that are statutorily and judicially followed in the state of Alabama under the land sales only.

  1. Statutory Redemption=The redemption period in Alabama is one of the longest in the country at three years from the time of sale, as long as a parcel was sold in a land sale.  However, if a parcel was sold to the state, it can last the greater of three years from the tax sale, or one year from when the purchaser gives written notice of the sale.
  2. Judicial Redemption=This is a statute holding that redemption can occur after the statutory redemption period by an interested party in the property if a lawsuit is filed but is usually only granted if the property owner has retained possession.  “Retaining ownership” has been deemed fairly liberal in the eyes of the courts.

Land sales:

  1. These sales are a bid up premium style of bidding for parcels and the overbid, or surplus, amount is held by the county and in some cases given to the party that redeems but in many cases it is kept by the county.
  2. Once a purchase has been made at a land sale, the purchaser has an immediate right to possession of the parcel but a “demand of possession” must be filed first.
  3. If no one bids, the state will purchase for the minimum and they are considered “sold to state” properties.

Lien Sales:

  1. The lien sales are bid down percentage rate of return starting at 12% per annum and a tax certificate is issued to the lowest bidder.
  2. Subsequent taxes are available to the winning purchaser and interest is earned at the same winning bid rate.
  3. Redemptions on the tax certificates can be made up until “the point of final judgment” and attorney fees cannot be recovered in the redemption.
  4. A purchaser can file a lawsuit to remove the right to redeem anytime after three years from the date of the sale and up 10 years post sale.

Conclusion

As you can see, the multi-sale system in Alabama can deem it a more difficult state to participate as an investor, but it shouldn’t scare investors away.  As William Hereford explains in both the white paper and interview, it’s just important to understand how each county handles the collection and which system it falls under.  You can also learn more from Hereford in his interview about the Department of Revenue parcels which are those the state purchases if they are not sold at a land sale.

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