The first number a new tax certificate buyer should actually check

Question

New certificate buyers tend to arrive with the statutory rate memorized and little else, which is a mistake, since the rate is the ceiling, not what anyone actually gets. Three numbers are worth prioritizing instead. The assessed value against the certificate amount tells you whether the taxes owed are trivial next to the parcel or a meaningful fraction of it. A $900 certificate on a parcel assessed at $180,000 is a very different bet than $900 on a parcel assessed at $2,400, and the second one is usually not something worth owning. The prior year auction results for that county tell you what a buyer will actually win at, regardless of the rate on paper. If bid-down took last year's sale from 16 percent to under 3, a model built on 16 is fiction. The redemption rate for that county over a few years tells you what kind of position this really is. If 96 percent redeem, it's a lending book and the parcel screen matters less. If it's 70 percent, expect to end up owning things. All three are usually available before registering, though what a county publishes varies by state and some publish almost nothing. Worth starting with the assessed value ratio, since it filters out the worst candidates fastest.

jessreyes12 · Answer

I'll ask the dumb version. Where does the assessed value come from and is it the same as what the thing is worth. Every assessor site I've looked at gives me a number that seems disconnected from what houses on that street list for, sometimes low by half. If the ratio you describe uses a number that's off by 50 percent, does the screen still work or am I just comparing two wrong things.

luis_carrera · Answer

Compass, assessed value is what the county uses for taxation and the relationship to market value differs by state, sometimes by a fixed ratio, sometimes not at all. For a first screen the absolute accuracy doesn't matter much. The question being asked is whether the certificate is small relative to the parcel or comparable to it, and a value that's uniformly half of market still answers that. Where it breaks is comparing across states with different ratios.

brandonlee36 · Answer

Auction results first. A common early mistake is building a spreadsheet on the statutory rate and then losing every parcel worth having to someone bidding the rate down to nearly nothing. The value ratio matters for which parcels to avoid. The clearing rate tells you whether the whole exercise is worth your Tuesday, and a weak clearing rate is reason enough to skip a county entirely.

The first number a new tax certificate buyer should actually check

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