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This is a question that must always be answered by you.  As with any investment don’t jump in head first expecting to figure it out as you go.  If you have some expendable capital laying around, you’ve studied the laws governing Illinois Tax Liens, and you’ve hired a real estate attorney to help you along the way then you stand a good chance of not loosing your money upfront.  Also don’t forget that knowing how tax liens work is only half the battle.  Competition between tax buyers is fierce often driving rates to 2, 1, or even 0%.  Make a plan and stick to it.  If you figure you need to buy at 5% to make money then DON’T buy at 1% because you get caught up in the moment or because you figure that if other buyers are making money at 1% i can too.

If you’ve ever sent a letter that starts like this i can guarantee you are one of the many who have become prey for the hundreds of people out there promising to make you rich buying tax liens.  Most books or seminars only give broad definitions of how tax liens work and then supply a form letter so that you may send it to the county treasurer to obtain the exact details of how the tax sale procedures work in that county.  Save your money!!!  If you are really interested in purchasing tax liens read the Illinois Property Tax Code and hire a qualified real estate attorney to explain it to you.  For those of you who purchased the book and haven’t gotten around to mailing the letters I’ll save you the trouble and give you the answers now.

1.  Please provide details of availability of tax lien certificate over-the-counter or through assignment purchasing.

Answer:  In most counties there is no over-the-counter, but you can purchase assignments through the county trustee

2.  Provide a current list of delinquent tax lien certificates in your county.

Answer:  Most counties will NOT provide you with this list without filing a proper freedom of information act request and they will charge you.  If you are only interested in assignable certificates, a list is available for purchase at ILTaxsale.com for counties represented by Joseph E. Meyer & Associates.

3.  Indicate the feasibility of my purchasing one or more certificates following your next auction?

Answer:  This is a really dumb question!!!

4.  Whether I will be able to purchase available certificates by mail, over the phone, over the internet, in person, or through an assistant.

Answer:  In Illinois you or someone working for you must be present at the tax sale to purchase certificates.  Most assignments are handled through the mail.

5.  Please indicate any fees applicable for purchasing a tax lien certificate in you county.

Answer:  There is no registration fee for the tax sale but some counties have a registration deposit up to $500

6.  Please provide the name and phone number of the employee in charge of disposing of certificates after the auction, so i can contact this employee with any further questions i may have.

Answer:  Nearly every county is going to refer you to the county trustee office for assignments.  Some counties operate there own trustee program through the county clerks office, but they will only give you limited information in regards to how tax liens work.

7.  Include the internet web site address, if used.

Answer:  If you can’t find a counties web site on the internet - you shouldn’t be buying tax liens...

There are currently no Internet Tax Sales conducted in Illinois although many counties do employ an automated bidding system.  Illinois law states that you must be present at the tax sale to bid.  While many new tax buyers may feel that Internet bidding is the way to go there are many major issues and concerns county collectors across the state will have to consider before opening up Illinois Tax Liens to the world wide web.

During the 2007 tax sale season (2006 real estate taxes & 2007 mobile home taxes) 30 counties implemented the R.A.M.S. automated bidding system.  All of the remaining 72 counties still use a verbal outcry system where the County Collector (a.k.a. County Treasurer) acts as the auctioneer.  To learn more about the automated tax sales and how they work visit the R.A.M.S. website at www.ramsauctions.com.

In numerous counties around Illinois professional tax buyers have been purchasing thousands of tax lien certificates at 0%.  This has completely baffled all of the new tax buyers and others in the industry.  Before you start buying at 0% you need to know the possible strategies the pros are putting in place.

Assessment book; book or list.
When used in reference to an assessment book, all mechanically, electronically, or otherwise produced record making material. The substantive information required to be placed in and kept as a public record in an assessment book by this Code may be transferred from one media to another within this definition, but the substantive information shall not be changed in the process and the record made shall reflect and make available exactly the same substantive assessment information as assessment books would contain and reflect had any other method been used. (35 ILCS 200/1‑5)

Assessor; assessors.
County, township, multi‑township or deputy assessors, all of whom evaluate and appraise property. (35 ILCS 200/1‑10)

Chief county assessment officer.
The supervisor of assessments or the county assessor in each county. (35 ILCS 200/1‑15)

Collector; collectors.
County, township, and deputy collectors. (35 ILCS 200/1‑20) Also known as the county treasurer.

Collector’s tax book; Collector’s warrant book.
When used in reference to a collector’s tax book, all mechanically, electronically, or otherwise produced record making material. The substantive information required to be placed in and kept as a public record in a tax collector’s book by this Code may be transferred from one media to another within this definition, but the substantive information shall not be changed in the process and the record made shall reflect and make available exactly the same substantive tax information as tax collector’s books would contain and reflect had any other method been used. (35 ILCS 200/1‑25)

County Board
The elected governing body of a county. (35 ILCS 200/1‑35)

Legal Description; Proper Description; Description
The describing of property (a) by reference to government surveys or by metes and bounds; (b) when subdivided into lots and blocks, by reference to duly recorded plats, or (c) by reference to an index number established in accordance with Section 9‑45. (35 ILCS 200/1‑80)

Mortgage lender.
Any institution, association, partnership, corporation, or person that is engaged in this State in the business of making loans of moneys, or that regularly makes loans of moneys in this State, or that services loans, including the collections of loans directly secured by mortgages, trust deeds in the nature of mortgages or other instruments in the nature of mortgages, which constitute a lien upon property in this State. (35 ILCS 200/1‑90)

Mortgagor.
An owner of property situated in any county of this State who creates a lien against the property in favor of a mortgage lender by executing a mortgage, trust deed in the nature of a mortgage or other instrument in the nature of a mortgage covering the property. (35 ILCS 200/1‑95)

Property Index Number; PIN; Parcel Number.
A number used to identify a parcel of property for assessment and taxation purposes. The index number shall constitute a sufficient description of the property to which it has been assigned, wherever a description is required by this Code. (35 ILCS 200/1‑120)

Property; real property; real estate; land; tract; lot.
The land itself, with all things contained therein, and also all buildings, structures and improvements, and other permanent fixtures thereon, including all oil, gas, coal and other minerals in the land and the right to remove oil, gas and other minerals, excluding coal, from the land, and all rights and privileges belonging or pertaining thereto, except where otherwise specified by this Code. Included therein is any vehicle or similar portable structure used or so constructed as to permit its use as a dwelling place, if the structure is resting in whole on a permanent foundation. (35 ILCS 200/1‑130)

Tax; Taxes.
Any tax, special assessments or costs, interest or penalty imposed upon property. (35 ILCS 200/1‑145)

Taxing District.
Any unit of local government, school district or community college district with the power to levy taxes. (35 ILCS 200/1‑150)

James & Associates, Forreston, IL

Did you know that there are only a few counties that you can purchase Over the Counter Tax Certificates?

During the tax sale in most counties in Illinois any certificate not purchased is defaulted to the County As Trustee.  The county then holds this certificate and completes all necessary procedures to ensure redemption or acquire a tax deed.  Joseph E. Meyer & Associates acts as Trustee on behalf of the county board more than any other company in Illinois.  “One of Joseph E. Meyer & Associates` central functions is serving as the Delinquent Tax Agent (trustee for taxing districts) for 78 of 102 counties in Illinois. Properties not purchased by tax buyers at the County Tax Sales are enrolled in the trustee program and managed by Joseph E. Meyer & Associates. After the redemption period expires on delinquent properties, Joseph E. Meyer & Associates obtains tax deeds on behalf of the county and sells the properties at public auction. Joseph E. Meyer & Associates also offers assignments of tax certificates.  To learn more about Tax Deed Sales, see a schedule of upcoming auctions, lists of assignable tax certificates visit their website at www.iltaxsale.com

No Tax Sales are scheduled at this time

If you can’t make it to the tax sale an assignment might be a viable alternative.  Any tax lien purchaser can assign his or her tax certificate over to another party.  Generally this includes all money due the tax lien purchaser (certificate face + penalties & fees) plus an additional fee for awarding an assignment.  It is always better to purchase a tax lien at the tax sale because you can avoid the assignment fee a tax lien purchaser may charge you.  Not to mention that when purchasing a tax certificate at the tax sale you will earn the rate you bid the very next day whereas you might not be entitled to another penalty on an assignment for many months.  This can be very confusing so i think an example will help.

Tax Lien Certificate
Purchase Date: 11/15/2007
Amount: $1000
Penalty Rate: 4%

If you were to buy this certificate at the tax sale you would be entitled to a 4% penalty the day after the tax sale.  This penalty amount does not increase for 6 more months.  For sake of a simple example let us say that someone with an interest in your tax certificate approaches you and requests an assignment 3 months after the tax sale.  We will assume that you are ready to dump this tax certificate for what you have in it plus whatever penalties you are entitled to at this point.  As of three months after the tax sale this tax certificate is worth $1040.  Now you could let it go for just $1040, but it will take some extra processing so you charge an additional $50 bringing the total to $1090.  The purchaser of your assignment will have to pay you $1090, but will only be entitled to $1040 if the delinquent tax payer redeems within the next 3 months.  To make matters worse since this certificate had such a low rate and face amount the purchaser of the assignment will have to hold this certificate over 9 months from the day it was assigned to post a $30 profit.  Of course this $30 profit is only realized if the delinquent tax payer redeems the tax certificate.

As you can see it is even more difficult to make money off of an assignment than it is to purchase the tax certificate at the tax sale.  However, if someone were interested in acquiring tax deed to a property via a tax certificate then an assignment may have more value.  Taking a tax certificate through all of the legal requirements to obtain a tax deed is a long and lengthy process that will undoubtedly require the consultation of a Real Estate Attorney.  Also note that if the delinquent tax payer does not redeem the certificate before the period of redemption and ALL of the legal requirements to take tax deed have not been completed - YOUR TAX CERTIFICATE EXPIRES WORTHLESS.

Let us assume you purchased a tax lien certificate at 18 percent at the last Will County, Illinois tax sale.  For ease of calculations we will assume the certificate is in the amount of $1,000 and was purchased on 11/15/2007.  So far we have:

Penalty Rate:  18%
Certificate Face:  $1,000
Purchase Date:  11/15/2007

This is enough information to calculate the amount you will make over different periods of time.  In Illinois the penalty rate is awarded to you every 6 months until the period of redemption expires.  The day after the tax sale you will be entitled to 18% of the face amount and 6 months after that another 18% and so on for each 6 months that passes before the period of redemption expires.  In dollars that would be $180 after 1 day, $360 after 6 months, $540 after 1 year, $720 after 1 year 6 months, $900 after 2 years, and $1080 after 2 years and 6 months. 

I know what most of you are thinking… Wow that’s a lot of money!!!  If it were only that simple everyone would be buying tax liens.  The truth is that the average rate of most tax liens in Illinois is closer to 4% than 18% as many books, seminars, and websites would have you believe.  So lets do the math on 4%.  That would be $40 after 1 day, $80 after 6 months, $120 after 1 year, $160 after 1 year 6 months, $200 after 2 years, and $240 after 2 years and 6 months.  These numbers aren’t quite as impressive and even worse yet some larger counties in Illinois go at rates of 1 or 2 percent.

This should give you a basic idea of how the return on tax liens works in Illinois.  This is a very over simplified example of how tax liens work and there are normally other fees and charges that apply.

If you’re new to purchasing tax liens in Illinois you’ve come to the right place.  IllinoisPropertyTaxLiens.com is one of the only places on the net that you’ll find loads of information about purchasing tax liens in Illinois.  Best of all - its all free.  I’m sure you’re searched the web and found a hundred or more so called manuals to how to purchase tax liens.  The problem with these manuals is that most of them discuss tax liens on a national scale and leave it up to you the reader to find the information on a state to state level.  This is difficult to do because tax liens are governed by state laws and laws are generally difficult to understand when one has little background in the subject.  IllinoisPropertTaxLiens.com will get you informed and pointed in the right direction if tax lien investing is for you.

The best place to start is with The Basics, but don’t forget to visit our forum and other resources.

So what is a tax lien?  Wikipedia defines a tax lien as a lien imposed on property by law to secure payment of taxes. Tax liens may be imposed for delinquent taxes owed on real property or personal property, or as a result of failure to pay income taxes or other taxes.  In Illinois there are tax liens on both real estate and mobiles homes.  A property tax lien is generally imposed by the county treasurer for delinquent property taxes owed to the county.  Property taxes are generally paid in two installments.  The first installment usually falls in or around June and the second installment around August or September.  Please note that depending on many possible situations these dates may vary greatly.  The important thing to know is that a tax lien can’t be sold until the actual property taxes become delinquent. 

Tax sales in Illinois generally occur in the October or November following the first and second installments.  The tax sale is an auction held by the county treasurer of each county in Illinois in an effort to collect any unpaid property taxes.  Tax lien investors attend the sale and purchase these unpaid property taxes, securing a lien against the property.  The tax lien investors in Illinois bid against each other for the penalty rate they will receive on the lien.  Illinois State Law states that penalty rates must be between 0 and 18 percent.  Bidding starts at 18 percent and moves downward usually in 1 percent increments.  It is important to note that this is a penalty rate for a six month period.  The tax lien purchaser who bids the lowest wins the bid.  After the tax sale the tax lien purchasers are presented with tax lien certificates by the county clerk.  These certificates contain information like penalty rate, face amount, current assessee (owner), and property address.  All redemptions by delinquent tax payers must be made to the county clerk.  Once the county clerk receives the necessary amount to redeem they will cancel the certificate lifting the tax lien against the property.

This is a very simplified version of how property tax liens work in Illinois.  There are many legal requirements that tax lien purchasers must complete in order to ensure their interest in the properties they hold liens against remain secure.

IllinoisPropertyTaxLiens.com is the only site solely dedicated to educating potential Illinois tax lien investors.  There is no membership required! Visit our learning center before spending hundreds or thousands on generic tax lien seminars or courses.

We’ll go over the basics and point you to the “Real” documentation on how to purchase Illinois tax lien certificates.  Familiarize yourself with our resources center to find information about specific counties in Illinois and feel free to ask questions in our Forum.

IllinoisPropertyTaxLiens.com was started to communicate information about purchasing property tax liens in Illinois.  The web is riddled with hundreds if not thousands of websites talking about tax lien sales across the county.  IllinoisPropertyTaxLiens.com is the only place you will find that exclusively discusses the procedures that occur when purchasing tax liens in Illinois.  We don’t ask that you purchase a book, newsletter, or even give us your email address to learn about purchasing tax liens in Illinois.

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