Buying Property At A Tax Sale: What You Need To Know

June 11, 2018

Are you interested in purchasing tax sale property in Alabama? Here are a few things you should know before buying.

What is a Tax Sale?

Property (ad valorem) taxes in Alabama are due every October 1st through December 31st. Taxes are collected by individual counties. After a series of notifications to delinquent owners unpaid properties are offered at a public auction. The tax sale will usually be run by the tax collection official of the county. 

Anyone can attend a tax sale and bid on tax certificates, the tax interest in the subject properties. If you are the highest bidder, your bid will earn 12% annual, simple interest. However, there is one exception. The amount of your bid that exceeds the tax due is called the excess bid. Any part if your bid that exceeds the value of the property by 15% will earn no interest.

How to obtain a Marketable Title?

After owning a tax certificate for three years, you become entitled to a tax deed.  (in some instances it is possible to obtain a tax deed sooner if the property is purchased from the State.)  If you intend to build on, renovate or sell the subject property, you need to make sure that you have marketable title.  Marketable title is title that clearly defines the chain of ownership to a certain piece of property. It is crucial to have so that no other person can lay claim to your property. To obtain marketable title after receiving a tax deed you need to be able to demonstrate three things:
  1. Adverse possession of the property for the statutory time period (3 years)
  2. There are no minors, incompetents, remaindermen, or creditors out there who wish to redeem—all of them must receive notice
  3. You must pay the taxes due on the property from the time you obtain a tax interest.
Property owners have 3 years from the date of the tax sale in which they can redeem their property (pay back what they owe plus interest). If this happens you will receive the money you paid plus 12% interest.

If the property has not been redeemed within 3 years from the date of the sale, then you are qualified to receive a tax deed, the State’s interest in the subject property.

A tax deed prevents the prior owner who is no longer occupying the property from redeeming after 3 years. If the owner occupies the property, then the owner may always redeem until they are ejected from the property. 

Obtaining marketable title after a tax sale can be confusing.  If you have questions or need assistance, please contact the lawyers at ISOM STANKO & SENTER, LLC.