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I've decided to focus the next series of blog posts on Arizona tax lien certificates. Why? Well, not only is it where I first got my start buying tax lien certificates but it is also one of the easiest places for new investors to begin.

First things first, let's start with the basics.

What is a real estate tax lien?

Simply stated, a tax lien is a debt to the government for unpaid real estate property taxes. The revenue generate from real estate property taxes fund important government service like public schooling, police protection and medical services.

Unpaid property taxes create a serious cashflow problem for the government. When property owners fail to pay their taxes the government has two choices, either raise taxes or eliminate public services.

Why don't people pay their property taxes?

There's not enough room to list every reason as to why people don't pay their property taxes. However, I believe that they can be reduced down to one of four possible reasons: 1) the owner didn't receive the tax bill; 2) the owner has forsaken the property and all responsibilities associated with it; 3) the property is involved in a legal dispute such as divorce, death or a bad business deal; and 4) the ownership interest is unknown.

When are tax liens sold?

In Arizona, the property tax lien attaches and property valuations are created on the first day of January of the current tax year A.R.S 42-17153 (C)(1). The tax lien is a claim/charge for real estate property taxes.

Between January 1 and March 1 the county assessor will mail The Notice of Valuation for the following year. The Notice specifies the assessed value that the county assessor plans on assigning to an owner's property for the proceeding year's tax roll.

If the property owner decides to file an appeal with their County Assessor's Office, they must do so no later than 60 days after the postmark on their "Notice of Value" postcard or the deadline date as indicated.

If an administrative appeal has not been filed, the property owner has until December 15th of the year in which the Notice of Value was sent to file an appeal directly with the Tax Court or County Superior Court.

Around August of the following year the county assessor will submit the property valuation roll to the county treasurer. The county treasurer will then calculate real estate property tax bills. Legal Zoning Class determines the Assessment Ratio. The assessment ratio times the value equals the assessed value. The assessed value is then used by the County Treasurer to calculate your tax bill. Legal Class is determined by the use of the property. Class 3 is an owner occupied residence. If it is residential rental property, the legal class would be class 4. Other classes of property are assessed at different ratios. Individual parcels may have more than one use. Such parcels will have a "mixed ratio" applied to the total value.

Property taxes are billed in September and are payable in two installments. The first installment is due on October 1, delinquent on November 1, and the second installment is due on March 1 of the next calendar year, delinquent on May 1st. Property taxes that are delinquent at the end of December are added to any previously uncollected taxes on a parcel for the Tax Lien Sale. (Sec. 42-18052 thru Sec. 42-18053)

Parcels whose taxes are subject to sale will be advertised, in January, in a county newspaper of general circulation. The advertisement appears about three weeks before the auction and is also posted on the internet.

They are listed by sequence number. Parcels fall into 1 of 2 groups. Each group is sorted by parcel number.

The listing will state place, date and time of the tax certificate sale. A listing of each parcel showing the parcel number, delinquent tax amount, the property owner's name, and the properties legal description. In addition, each listing includes the Assessor’s full cash value of the land, improvements and any personal property associated with the property. The parcels are consecutively numbered for reference during the sale.

According to state statute the tax sale is to be held during the month of February ( Sec. 42-18112)

Stay tuned.