Lets go over the role of the county government in tax lien investing and we will provide an overview of the federal and state governments.
The federal government is funded primarily through income taxes and won’t play too large of a role in tax lien investing. State governments get a portion of their revenue from income taxes, but the largest amount of state revenue comes from sales taxes. The state is important because it determines how tax sales will operate within it’s boundaries. In most cases, it determines the system used; tax liens, tax deeds, redemption deeds, or some combination of any or all of them. The state will determine when sales will occur during the year and by what auction method will be used such as using a bid down the interest approach, the premium bidding method, or another bidding method.
County governments primarily receive income from both property taxes and from the tax sale process. Even though counties do receive money from the state and federal governments, their primary source of income is through property taxes.
Elected officials manage the county government and each official plays a role in the tax sale process. Some of the officials are the commissioner, the sheriff, the property assessor, and the treasurer. The treasurer or tax collector will typically be a primary point of contact at the county for financial information. At the assessors office, one can gain more information regarding the condition of a property. The sheriff is sometimes responsible for the actual tax sale. In that case, the tax sale is referred to as a sheriff’s sale.
The County Treasurer or Tax Collector
The County Treasurer’s duty is to receive and safely keep the revenues of all public monies of the county. They also invest the surplus funds. They distribute the monies collected to the proper recipients and they pay the county’s bills as directed by the County Board.
So why is the County Treasurer important to us? First of all, they typically oversee the tax sale. They’re also responsible for the taxation of all personal and real property within the county. They send out the tax notices, delinquency notices, and tax sale notices. It is generally the treasurer who is contacted when purchasing a tax lien directly from the county or to get information about a potential investment.
The treasurer may also be given some leeway from the state with certain things pertaining to the tax sale. They may, for instance, have power over whether tax liens or deeds are sold after the auction.
The County Assessor
The county assessor is in charge of assessing a property’s tax assessed value. They go through and put a value on every piece of real estate within the county. They determine the value by considering both the county’s budget and also the fair market value of the real estate.
So why is the Assessor important to us?
The most important thing for us is that property records are typically stored with the county assessor. When we are researching potential investments, the property records will be important to us. On those records we would find images, values, addresses, sales history, property descriptions, etc. And, increasingly, that information is stored online on the county assessor’s website instead of only in paper form at the county office.
So how are properties assessed?
Properties are assessed using one of three methods: market, cost, or an income approach. Most Assessors use a computer assisted mass appraisal system to evaluate every property in the county, but let’s quickly go through each of those methods.
Fair market value has been defined as the price a willing and informed purchaser would pay to an unrelated, willing and informed seller where neither party is under compulsion to act. A good way to judge that value is by checking the prices of recent sales of comparable properties. That’s where we get the term “comps.”
Some people will use Zillow or other websites to get a quick look at comps or estimated property values. The key word there is estimated. Although Zillow has been know to be right on, it also can be off by quite a bit. So it’s good to get an idea from Zillow, but it shouldn’t be treated as absolute truth.
Where recent comparable property sales are not available, a cost based approach may be used. In this approach, the original or replacement cost of a property is reduced by an allowance for decline in value (depreciation) of improvements. Replacement cost may be determined by estimates of construction costs.
Using the income approach, value is determined based on present values expected income streams from the property. This may be used on farmland where crops produce revenues each year. So the assessor may choose to include potential income for that property as a source of property value.
The federal government is funded primarily through income taxes and won’t play too large of a role in tax lien investing. State governments get a portion of their revenue from income taxes, but the largest amount of state revenue comes from sales taxes. The state is important because it determines how tax sales will operate within it’s boundaries. In most cases, it determines the system used; tax liens, tax deeds, redemption deeds, or some combination of any or all of them. The state will determine when sales will occur during the year and by what auction method will be used such as using a bid down the interest approach, the premium bidding method, or another bidding method.
County governments primarily receive income from both property taxes and from the tax sale process. Even though counties do receive money from the state and federal governments, their primary source of income is through property taxes.
Elected officials manage the county government and each official plays a role in the tax sale process. Some of the officials are the commissioner, the sheriff, the property assessor, and the treasurer. The treasurer or tax collector will typically be a primary point of contact at the county for financial information. At the assessors office, one can gain more information regarding the condition of a property. The sheriff is sometimes responsible for the actual tax sale. In that case, the tax sale is referred to as a sheriff’s sale.
The County Treasurer or Tax Collector
The County Treasurer’s duty is to receive and safely keep the revenues of all public monies of the county. They also invest the surplus funds. They distribute the monies collected to the proper recipients and they pay the county’s bills as directed by the County Board.
So why is the County Treasurer important to us? First of all, they typically oversee the tax sale. They’re also responsible for the taxation of all personal and real property within the county. They send out the tax notices, delinquency notices, and tax sale notices. It is generally the treasurer who is contacted when purchasing a tax lien directly from the county or to get information about a potential investment.
The treasurer may also be given some leeway from the state with certain things pertaining to the tax sale. They may, for instance, have power over whether tax liens or deeds are sold after the auction.
The County Assessor
The county assessor is in charge of assessing a property’s tax assessed value. They go through and put a value on every piece of real estate within the county. They determine the value by considering both the county’s budget and also the fair market value of the real estate.
So why is the Assessor important to us?
The most important thing for us is that property records are typically stored with the county assessor. When we are researching potential investments, the property records will be important to us. On those records we would find images, values, addresses, sales history, property descriptions, etc. And, increasingly, that information is stored online on the county assessor’s website instead of only in paper form at the county office.
So how are properties assessed?
Properties are assessed using one of three methods: market, cost, or an income approach. Most Assessors use a computer assisted mass appraisal system to evaluate every property in the county, but let’s quickly go through each of those methods.
Fair market value has been defined as the price a willing and informed purchaser would pay to an unrelated, willing and informed seller where neither party is under compulsion to act. A good way to judge that value is by checking the prices of recent sales of comparable properties. That’s where we get the term “comps.”
Some people will use Zillow or other websites to get a quick look at comps or estimated property values. The key word there is estimated. Although Zillow has been know to be right on, it also can be off by quite a bit. So it’s good to get an idea from Zillow, but it shouldn’t be treated as absolute truth.
Where recent comparable property sales are not available, a cost based approach may be used. In this approach, the original or replacement cost of a property is reduced by an allowance for decline in value (depreciation) of improvements. Replacement cost may be determined by estimates of construction costs.
Using the income approach, value is determined based on present values expected income streams from the property. This may be used on farmland where crops produce revenues each year. So the assessor may choose to include potential income for that property as a source of property value.