county tax sales and foreclosure sales · county tax sale: overview •offers for sale tax lien on...

County Tax Sales and Foreclosure Sales

Indiana County Assessors’ Association Conference Indianapolis, Indiana January 18-20, 2012

Timothy J. Rushenberg

Outline

• Overview of County Tax Sale Process

–Commissioners’ Certificate Sales

• Overview of Foreclosure Sale Process

• IAAO Guidance on Foreclosures

*Material in this presentation is not intended to be construed, interpreted, or provided as legal advice. Talk to your county attorney.

Purpose

• To know the differences between the delinquent property tax sale process conducted by the treasurer and auditor, the commissioners’ certificate sale process, and the county sheriff/foreclosure sale process.

• To apply IAAO guidance on appraisal techniques for sheriff sale/foreclosure sales to the annual adjustment/general reassessment processes in your county.

County Tax Sale: Overview

• Offers for sale tax lien on delinquent property. Not selling property itself!

• If owner delinquent since prior year’s spring installment, between January 1 and within 51 days of current year due date (i.e., July 1), treasurer certifies list of delinquent properties to auditor.

• Auditor sends certified notice and publishes newspaper advertisements alerting landowner of lien on property and that it will be sold at tax sale.

• If owner does not pay delinquent taxes, auditor files an Application for Judgment for collection of unpaid taxes. Judgment Order permits sale of property at tax sale and order must be signed at least 3 days before sale.

• Lienbuyer must send certified mail notice to interested parties within 9 months of tax sale allowing person to redeem property by end of 1 year redemption period.

• If owner does not redeem, Buyer may petition court for tax deed. Court will consider petition and order the auditor to prepare tax deed.

County Tax Sale

2011 Tax Sale Process: 2010 Tax Bills

June 1, 2009

July 1, 2009

August 1, 2009

February 15, 2010

Assessor 2009-pay-2010 ratio study

submitted / approved

Assessor Rolls 2010 Gross Assessed

Values to Auditor

Auditor Certifies 2010 Net Assessed

Values to DLGF

November 1, 2009 Local Units Adopt 2010 Budgets

DLGF certifies 2010 Budgets

2010 Tax Bills Due May 10, 2010

Repeat steps for 2010-pay-

2011 Cycle

Assessment & Valuation Date /

State lien attaches March 1, 2009

May 10, 2011

July 1, 2011

2011 Tax Bill Due Date

Treasurer to certify list of 2010 delinquent property taxes to

Auditor

Mail tax sale notice to property owner and First Ad runs in

Newspaper

Second Ad to Run for tax sale

Auditor and Treasurer to apply for Judgment against properties

on tax sale list

Max. 51 Days after Due Date

Third Ad to Run for tax sale

Min. 21 days between notice of tax sale and

application for judgment.

Court Hearing on Application

Court Order

Tax Sale on 2010 delinquencies

Min. 15 days before sale.



Tax sale must be held maximum of 171 days after delinquent property tax list is certified to Auditor.

December 19, 2011

December 16, 2011

December 12, 2011

December 2, 2011

November 10, 2011


Tax sale on 2010 delinquent taxes

Buyer to give notice of purchase at tax sale (“4.5 notice”)

One (1) Year Redemption Period

Expires

Maximum 9 month “4.5” period

Buyer to petition court for tax deed and give notice to owner

of petition (“4.6 notice”)

Court to order auditor to issue tax deed

One (1) year tax sale redemption period

Maximum 6 month “4.6” period after

redemption period expires

Maximum 61 days from petition filed

December 19, 2011

September 19, 2012

December 19, 2012

June 19, 2013

August 19, 2013


County Tax Sale: Certified List

• Between January 1 and NLT 51 days after tax bill due date (i.e. July 1), county treasurer shall certify to county auditor list of real property where property taxes or special assessments from the prior year’s spring installment or before are delinquent.

• County auditor is required to maintain list of all real property eligible for tax sale.

County Tax Sale: Removal from List

• Property may not be removed from list before tax sale unless:

– delinquent taxes and special assessments due before list certified (e.g., prior year Spring or before, prior year Fall, current year Spring); and

– penalties due on delinquency, interest, and costs directly attributable to tax sale (e.g., tax sale costs, postage);

have been paid in full.

• County Treasurer may accept partial payments of delinquent property taxes, etc… after list is certified.

– However, partial payment does not remove property from list but reduces minimum bid amount at tax sale.

County Tax Sale: Notice

• Tax sale process involves issuance of 3 notices to owner:

– County Auditor’s Notice of Tax Sale – (1) newspaper advertisements for three weeks; and (2) certified mail sent to last known address and, if certified mail receipt not returned, then by first class.

– Buyer’s Notice of Right to Redemption – sent to owner of

property/person with substantial interest (“4.5 Notice”). – Buyer’s Notice of Filing a Petition for Tax Deed – sent to owner of

property/person with substantial interest (“4.6 Notice”).

• Title conveyed by a tax deed may be defeated if the 3 required notices were not issued in substantial compliance with legal requirements.

County Tax Sale: Auditor’s Newspaper Advertisement

• List of tracts or real property eligible for sale.

• Sold at public auction to highest bidder, subject to redemption.

• Minimum Bid: Property will not be sold for less than: – delinquent taxes and special assessments; – taxes and special assessments due in year of tax sale, whether or not

delinquent [i.e., Spring and Fall 2011 taxes]; – all penalties due on delinquencies; – Greater of $25 or postage and publication costs, and any other actual

costs incurred by county; and – any unpaid costs due from prior tax sale.

• Redemption Amount (SEE LATER SLIDE)

County Tax Sale: Auditor’s Newspaper Advertisement

• Location by key number and street address, if any, or common description other than legal description.

– Township assessor, or county assessor, upon written request from county auditor, shall provide information to be in notice.

– Misstatement in key number or street address does not invalidate valid sale.

• Name of single owner; or name of at least one (1) of the owners with multiple owners.

• Procedure to be followed for Judgment and Order of Sale.

• Location, date, and time of county tax sale.

• Surplus disposition (SEE LATER SLIDE)

County Tax Sale: Auditor’s Certified Mail Notice

• Notices to be mailed NLT 21 days before earliest date of application of Judgment and Order for Sale may be filed.

• Notice of Sale sent by certified mail, return receipt to owner of record at the last known address of owner of property as indicated in records of county auditor on date tax sale list is certified (i.e., July 1).

• Send notice by first class mail to owners from whom certified mail return receipt was not signed and returned.

– If both notices are returned due to incorrect addresses, county auditor shall research their records to determine more accurate address.

– Failure to obtain more accurate address does not invalidate otherwise valid sale.

• Required Contents of Certified Mail Notice:

1. Key number and street address, if any, or other common description of property other than legal description.

2. Components of amount required to redeem from tax sale.

• County auditor must present proof of mailing to court along with application for Judgment and Order for sale.

• Failure by owner to receive or accept notice does not affect validity of Judgment and Order.

• Owner of property shall notify auditor of their correct address.

• Notice considered sufficient if mailed to address required.

County Tax Sale: Auditor’s Certified Mail Notice

County Tax Sale: Judgment and Order of Sale

• NLT 15 days before tax sale, court examines updated list of real property remaining on tax sale list.

• NLT 7 days before tax sale, court conducts hearing regarding any objections/defenses to parcels included in sale. Court required to send notice to each objecting party of time and place of hearing.

• NLT 3 days before tax sale, court enters judgment for those taxes, special assessments, etc. that appear to be due.

– Judgment is against each tract or item of real property for each kind of tax, special assessment, penalty, or cost.

– Clerk to enter order for sale of property with judgments against it.

• Court order constitutes list of real property offered for sale.

County Tax Sale: Judgment and Order of Sale (continued)

May 10, 2011

July 1, 2011

2011 Tax Bill Due Date

Treasurer to certify list of 2010 delinquent property taxes to

Auditor

Mail tax sale notice to property owner and First Ad runs in

Newspaper

Second Ad to Run for tax sale

Auditor and Treasurer to apply for Judgment against properties

on tax sale list

Max. 51 Days after Due Date

Third Ad to Run for tax sale

Min. 21 days between notice of tax sale and

application for judgment.

Court Hearing on Application

Court Order

Tax Sale on 2010 delinquencies




Tax sale must be held maximum of 171 days after delinquent property tax list is certified to Auditor.

December 19, 2011

December 16, 2011

December 12, 2011

December 2, 2011

November 10, 2011

County Tax Sale: Conduct of Sale

• County tax sale must:

– be held at times and place stated in notice of sale; and

– not extend beyond 171 days after list is certified to auditor.

• Real property may not be sold to collect:

– delinquent personal property taxes; or

– taxes or special assessments which are chargeable to other real property.

• Real property may not be sold if all delinquent taxes, penalties, costs, etc… are paid before tax sale.

• Treasurer must sell real property, subject to the right of redemption, to highest bidder at public auction.

County Tax Sale: Minimum Bid

• Real property may not be sold for amount less than sum of:

– delinquent taxes and special assessments;

– taxes and special assessments due in year of tax sale, regardless of whether delinquent [i.e. 2011 taxes];

– all penalties due on the delinquencies;

– amount reflecting costs incurred by county due to tax sale;

– any unpaid costs which are due from a prior tax sale; and

– other reasonable expenses of collection, including title search expenses, UCC expenses, and reasonable attorney's fees incurred by date of tax sale.

• Buyer must immediately pay amount of bid to treasurer.

• Treasurer applies payment in following manner:

– Taxes, special assessments, penalties, and costs. – Personal property delinquencies in county by taxpayer. – “Tax sale surplus fund.”

• Owner who loses property through tax deed, or bidder upon redemption, may file for surplus.

– However, if claimant is owner at time tax deed is issued but acquired property from delinquent taxpayer after property was sold at tax sale; or is not owner of record at time tax deed is issued, court must approve claim for surplus.

• Amount deposited in surplus fund is transferred to general fund in 3 year period after date of its receipt.

County Tax Sale: Payment of Minimum Bid

• Any person may redeem real property sold at any time before expiration of one (1) year redemption period by paying county treasurer:

– 110% of minimum bid, if property redeemed w/in 6 months; or

– 115% of minimum bid, if property redeemed more than 6 months but not more than one (1) year after date of tax sale.

– 10% per annum on amount purchase price exceeds minimum bid [i.e., surplus].

– All taxes and special assessments upon the property paid by buyer after sale plus 10% per annum.

– Attorney’s fees and costs of giving notice; and costs of title search up to maximum amount set by judge.

County Tax Sale: Redemptions

Minimum Bid: $10,000 Winning Bid Amount: $100,000

If property owner redeems in 95 days…. $10K minimum bid + Flat 10% ($1,000) $11,000

10% per annum of *$90K surplus -- ($90K/365) $2,342

$1K in taxes paid by lien buyer after sale + 10% per annum $1,004

Attorney’s fees and costs of giving notice and title search (137B) $600 ______________

Amount Owner Pays to Redeem $14,946

*Upon redemption, lien buyer may file claim for $90,000 surplus

County Tax Sale Redemption Example

Tax Sale Process: “4.5” Notice from Buyer to Owner




Expires









Tax Sale Process: “4.6” Notice from Buyer to Owner




Expires









• Tax deed vests in grantee an estate in fee simple absolute, free and clear of all liens and encumbrances created before or after tax sale…

…except those liens granted priority under federal law (e.g., IRS liens) and lien of state or political subdivision for taxes and special assessments which accrue after the tax sale and which are not removed (e.g., sewer or weed liens).

• Also, tax deed does not extinguish easement recorded prior to tax sale; and tax deed conveys title subject to all easements recorded before tax sale.

• An executed tax deed is prima facie evidence of: – regularity of sale of real property described in deed; – regularity of all proper proceedings; and – valid title in fee simple in the grantee of the deed.

County Tax Sale: Tax Deeds

County Tax Sales: Sales Disclosure

Sales disclosure form should be completed for tax deed, but no

$10 SDF fee should be collected because tax deed is a

conveyance document resulting from a compulsory transaction

“as a result of…court order….” IC 6-1.1-5.5-2; IC 6-1.1-5.5-4.

Commissioners’ Certificate Sale

• County commissioners are issued a tax sale certificate for all properties where a lien was not sold at county tax sale.

– Awarded same rights as Buyer; however, do not pay money. – May offer for sale tax sale certificate for reduced minimum bid. – May establish selling price for certificate by resolution.

• Buyer of lien at Commissioner’s Certificate Sale will pay amount established by commissioners and are issued tax sale certificate with same requirements as property purchased at county tax sale.

• Significant difference between certificate sale and prior county tax sale is Certificate Sale redemption period is 120 days and minimum bids are reduced.

Commissioner Certificate Sale: Overview

County Tax Sale

One day later Commissioners are issued certificates

for unsold parcels

Commissioners adopt resolution to hold certificate sale and establish

prices less than the original minimum bid for parcels at county tax sale.

Last of 3 successive weekly advertisements run

Certificate Sale Date

Buyer gives notice of certificate sale purchase to interest holders

(“4.5 notice”)

120 day Redemption Period Expires

Buyers files petition to court for tax deed and gives notice of petition

(“4.6 Notice”)

Court orders Auditor to issue tax deed

Parcels do not attract their minimum bids at

county tax sale; certificates issued to

commissioners

NLT 30 days before sale

Max. 90 day “4.5” period

120 day Redemption period from sale date

Max. 6 month “4.6” period after redemption

expires

Max. 61 days after petition filed

Commissioner Certificate Sale: Process

• Amount of minimum bid at last county tax sale;

• 10% of amount for which the certificate sold;

• Attorney’s fees and costs of giving notice;

• Costs of title search;

• All taxes and special assessments paid by buyer after certificate sale plus 10% interest per annum; and

• All costs of sale, advertising costs, and other expenses of the county directly attributable to the sale of certificates of sale.

Commissioner Certificate Sale: Redemption

Minimum Bid at Certificate Sale: $1,000

Certificate Amount (county tax sale minimum bid): $10,000

Winning Bid Amount at Certificate Sale: $20,000

If property owner redeems in 43 days from commissioners’ certificate sale….

Amount of minimum bid at last county tax sale $10,000

10% of amount for which certificate sold ($20K x 10%) $2,000

Attorney’s fees and costs of giving notice; and title search $500

Taxes paid after sale plus 10% interest per annum $0

All costs of sale (county and vendor) -$25 county fee for advertising $25 -10% of winning bid amount to vendor for Internet sale $2,000 ____________

Redemption Amount to be Paid $14,525

Certificate Sale: Redemption Example

County Tax Sale

One day later Commissioners are issued certificates

for unsold parcels

Commissioners adopt resolution to hold certificate sale and establish

prices less than the original minimum bid for parcels at county tax sale.

Last of 3 successive weekly advertisements run

Certificate Sale Date

Buyer gives notice of certificate sale purchase to interest holders

(“4.5 notice”)

120 day Redemption Period Expires

Buyers files petition to court for tax deed and gives notice of petition

(“4.6 Notice”)

Court orders Auditor to issue tax deed

Parcels do not attract their minimum bids at

county tax sale; certificates issued to

commissioners

NLT 30 days before sale

Max. 90 day “4.5” period

120 day Redemption period from sale date

Max. 6 month “4.6” period after redemption

expires

Max. 61 days after petition filed

Commissioner Certificate Sale: 4.5 and 4.6 notices

Tax deed issued to lien buyer requires county auditor to

remove taxes, special assessments, interest, penalties, and

costs remaining due as the difference between the amount of

the minimum bid at the county tax sale and the amount paid

for the certificate at the commissioners’ certificate sale.

Commissioner Certificate Sale: Tax Deeds

Mortgage Foreclosure Sales

Foreclosure Sales: Basics • Mortgage: financing arrangement where owner of property

(or person buying property) receives a loan and the property is pledged as security for repayment of the loan.

• Foreclosure: process by which mortgagee (i.e., lender) may reach the land and improvements to satisfy mortgage obligation in event of default by mortgagor (i.e., borrower).

• Foreclosure is a legal process – not a sale!

• If law did not provide a foreclosure process, every creditor would be a general unsecured creditor.

– By getting a mortgage, the lender reduces its risk of lending, and this benefits both the lender and borrower.

– Lenders offer lower interest rates and better terms for mortgage loans then they do for unsecured loans.

Foreclosure Sales: Basics (continued)

• Lender brings action asking court to issue order calling for sale of mortgaged property.

• Judicial foreclosure: process is supervised by a court.

– Lender must initiate lawsuit and foreclosure sale will be supervised county sheriff in Indiana.

– Sheriff sets date by which borrower must pay or else lose property.

Borrower misses scheduled payment(s)

Lender sends notice of default

Borrower can cure default, sell short, deed in lieu of foreclosure, or do

nothing

Court orders seizure of property for sale to satisfy debt. Lender files praecipe with clerk to execute

Judgment.

Property is sold by public auction to pay off the debt (Sheriff Sale)

Lender or third party buys

Lender buys and adds to Other Real Estate Owned (OREO)

Property held in lender portfolio may then be sold on open market as arms-

length transaction to third party.

Overview of Judicial Foreclosure Process In this process,

repayment of the loan is secured by a

contract known as a mortgage. The terms

of the mortgage allow the lender to ask the court to seize and sell the property to repay

the loan.

Short Sale – borrower, with approval of lender,

sells for less than balance on note and

lender forgives unpaid balance.

Deed in Lieu – borrower deeds property back to

lender in attempt to satisfy the debt. The

debt may be cancelled by lender.

The lender often is the high bidder with a bid equal to the judgment.

Filing of foreclosure action/complaint

Judgment cannot be executed for at least 3 months from filing of complaint.

Sale must occur NLT 120 days after date Judgment certified to sheriff by clerk

Foreclosure Sales: Foreclosure Rates (November2011)

Rank State *Ratio Total Properties 1 Nevada 1:175 6,512 2 California 1:211 63,689 3 Arizona 1:256 10,766 4 Utah 1:290 3,285 5 Georgia 1:330 12,327 6 Michigan 1:330 13,777 7 Florida 1:358 24,739 8 Illinois 1:427 8,691 9 Ohio 1:500 10,184 10 South Carolina 1:517 4,028

#20 Indiana 1:902 3,115 Source: www.realtytrac.com

*Ratio indicates 1 in every # of housing units received a foreclosure filing in Oct 2011

http://www.realtytrac.com/

Foreclosure Sales: Mortgage Foreclosure Process

• In a court proceeding to foreclose a mortgage, Judgment or Decree of Sale may not occur for at least 3 months after complaint filed by the mortgage company.

• Judgment or Decree to foreclose entered by court having

jurisdiction may be filed with clerk in any county.

Foreclosure Sales: Judgment

• After 3 month period expires, person who may enforce judgment and decree (e.g., mortgage company) may file praecipe with clerk who then certifies to sheriff a copy of judgment and decree.

• Upon receiving certified judgment, sheriff sells mortgaged premises to satisfy judgment, interest, and costs at public auction at office of sheriff or at another location that is reasonably likely to attract higher competitive bids.

Foreclosure Sales: Public Advertisement of Sale

• Before selling mortgaged property, sheriff must advertise sale by publication once each week for 3 successive weeks in newspaper.

– The first publication is made at least 30 days before date of sale.

– At the time of placing first advertisement by publication, sheriff also serves copy of written or printed notice of sale upon each owner of the real estate through personal service or certified mail, return receipt.

Foreclosure Sales: Administrative Fee

• Sheriff may charge $200 administrative fee to retrieve actual costs directly attributable to administration of sheriff sale.

• The fee is:

– payable by the person seeking to enforce the judgment and decree (e.g., mortgage company); and

– due at time of filing of the praecipe.

Foreclosure Sales: Manner of Sheriff Sale

• Sheriff offers to sell property on foreclosure in a manner that is “reasonably likely” to bring highest net proceeds from the sale after deducting the expenses of the offer and sale.

• Sheriff schedules date and time of sale for:

– date NLT 120 days after judgment and decree are certified by clerk; and

– time certain between the hours of 10 a.m. and 4 p.m. on any day of the week except Sunday.

• Minimum bid is usually submitted by the plaintiff (i.e., mortgage company) in the foreclosure action.

• The bids may be received the morning of the sale.

Foreclosure Sales: Redemption

• Before sheriff sale occurs, any owner of real estate may redeem real estate from judgment by payment to the:

– clerk before issuance to sheriff of judgment and decree; or

– sheriff after issuance to sheriff of judgment and decree;

of the amount of the judgment, interest, and costs for the payment or satisfaction of which the sale was ordered.

• Once sheriff sale is complete, mortgagor/borrower no longer

has redemption rights.

Foreclosure Sales: Sheriff Sale Proceeds

If property sold at sale, sheriff pays proceeds as follows:

(1) expenses of offer and sale, including expenses incurred;

(2) payment of principal due, interest, and other costs;

(3) residue secured by mortgage and not due;

(4) If residue does not bear interest, deduction must be made by discounting legal interest.

Any surplus must be paid to clerk to be transferred, as court directs, to mortgagor (e.g., homeowner).

Foreclosure Sales: Payment of Property Taxes

• Before sheriff sale, party that filed praecipe (e.g., mortgage company) shall pay delinquent property taxes, assessments, penalties, and interest due and owing on property.

• If delinquent tax payments are not made in full by sale date, the sheriff:

– Cancels sheriff’s sale; and

– may only conduct sheriff’s sale only:

• upon evidence delinquent tax payments have been made in full; and

• after subsequent praecipe is filed, costs are paid and sale is re-advertised.

Foreclosure Sales: Sheriff Sale Deeds

• Immediately after sale, the sheriff shall:

– execute and deliver to buyer; and

– record with the county recorder;

a deed of conveyance for the property (e.g., sheriff’s deed), which must be valid to convey all the right, title, and interest held or claimed by all of the parties to the action and all persons claiming under them.

• *98% of the time, buyer at sheriff sale is mortgage lender.

*Source SRI Sheriff Sale division

Foreclosure Sales: Sales Disclosure

Sales disclosure form should be completed for sheriff sale

deed, but no $10 fee should be collected because sheriff sale

deed is a conveyance document resulting from a compulsory

transaction “as a result of foreclosure or express threat of

foreclosure…”. IC 6-1.1-5.5-2; IC 6-1.1-5.5-4.

IAAO Guidance on

Use of Foreclosure Sales

IAAO Guidance: Market Value defined

• Most probable price (in terms of money) which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming the price is not affected by undue stimulus.

• Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions:

– Buyer and Seller are typically motivated;

– Both parties are well-informed and well-advised, and acting in what they consider their best interest;

– A reasonable time is allowed for exposure on the open market;

– Payment is made in terms of cash or in terms of financial arrangements comparable thereto; and

– The price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions granted by anyone associated with the sale.

IAAO Guidance: Market Value defined (continued)

Can foreclosure-related sales be used in annual adjustments/general reassessment?

Yes, under certain conditions to be discussed.

Can delinquent property tax sales be used?

No, because the buyer’s purchase at a county tax sale is for a lien on the property, not the property itself; thus, the purchase does not represent the normal consideration of the property, which is required in order to be a market value transaction and used for valuation purposes.

IAAO Guidance: Foreclosure vs. Foreclosure-related Sales • Important to understand difference between foreclosure

process and foreclosure-related sales.

– Foreclosure is a legal process – not a sale!

– Foreclosure-related sales that pass market value test may be candidate for appraisal modeling, valuation, and ratio studies. • Bank-owned sale • Short sale

• In a depressed market, there may be as many or more foreclosure-related sales than traditional market sales.

– May affect supply and demand curve so that traditional sellers are forced to lower their prices in order to sell their property.

– When foreclosure-related sales are common, they may represent typical market stimulus.

IAAO Guidance: Foreclosure-related Sales

• Impact of foreclosure-related sales can be evaluated by determining whether following conditions apply:

– Are foreclosure sales affecting sales prices of typical sales in area?

– Are foreclosure sales the only properties selling in area?

IAAO Guidance: Foreclosure-related Sales

Guide to Foreclosure-Related Sales and Verification Procedures (Aug 2009); Standard on Verification and Adjustment of Sales (Nov 2010); and “2011 Ratio Study Review Process / Annual Adjustment Guidance” (DLGF, Jan 2011):

• For foreclosure-related sales to be used for modeling, valuation, or ratio studies, they must first meet market value test.

• When foreclosure-related sales constitute a preponderance of sales in an area, or research shows little difference between them and comparable conventional sales, validated foreclosure-related sales may be used. Guide to Foreclosure-Related Sales and Verification Procedures (Aug 2009)

• Foreclosure-related sales should be considered for model calibration and ratio studies when they represent more than 20% of all sales in the market area, but only after a thorough verification process of each sale. Standard on Verification and Adjustment of Sales (Nov 2010).

IAAO Guidance: Sales Verification

• Main purpose of sales verification is to determine whether a sale meets the definition of market value transaction.

• Sales verification is required to determine whether to include

foreclosure-related sales in modeling, valuation, or ratio studies.

Foreclosure-related Sale: Short Sales

• Pre-foreclosure sale in which total sales price is less than total amount owed (i.e., upside down on house).

– Mortgage lender agrees to forgive a portion of the loan balance and allows a transfer of title to avoid a formal foreclosure.

– With the permission of the lender, the seller finds a third-party buyer and the proceeds of the sale go directly to the lender.

• In some cases, short sales may meet test for market value transaction and, thus, can be used for assessment.

Foreclosure-related Sale: Deed in Lieu of Foreclosure

• Occurs when mortgagee (lender) and the mortgagor (borrower) have agreed that rather than being foreclosed upon, seller will convey property to lender by means of deed.

• Property becomes lender’s property. • Should not be used for assessment purposes.

Foreclosure-related Sale: Bank-Owned Sales

• Other Real Estate Owned (OREO) properties

– Real property acquired by financial institution other than the bank’s facilities, such as real estate acquired through foreclosure.

– Banks make diligent efforts to dispose of OREO properties.

– Sales of OREO properties are often sold individually or as part of lot.

• OREO sales that are determined to meet market value test may be included for assessment purposes.

Foreclosure

REMINDER!!! • Foreclosure: process by which mortgagee (lender) may reach

land and improvements to satisfy mortgage obligation in event of default by mortgagor (borrower).

• Foreclosure is a legal process – not a sale!

Sheriff’s Sale

• Property is sold by means of a public auction to the highest bidder to satisfy a court order.

• Minimum bid is often set by the amount of the judgment by

the lender/mortgagee. • Typically, highest bidder is the lender/mortgagee.

• In rare instances a third party is winning bidder, sale may be

considered for assessment purposes, if well-advertised and well-attended (i.e., offered on “open market”).

County Tax Sales and Foreclosure Sales: Conclusion

• County Tax Sale: delinquent taxes from prior year’s first installment and before are certified on list for tax sale from Treasurer to Auditor after current year property tax bill due.

• Commissioners’ Certificate Sale: for those properties unsold at county tax sale, commissioners acquire lien and offer lien for sale for less than delinquent taxes etc.

• Sheriff Sale: judicial foreclosure on mortgaged property with public sale to highest bidder conducted by county sheriff.

• IAAO Guidance: if foreclosure-related sales meet market value test; and are a preponderance of sales in neighborhood, or there is little difference between them and comparable traditional sales, such sales may be used.

Questions?

Timothy J. Rushenberg

Office: (317) 842-5818

Toll Free: (800) 800-9588

Cell phone: (317) 607-7791

[email protected]

county tax sales and foreclosure sales · county tax sale: overview •offers for sale tax lien on...

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