Arizona Tax Lien Certificates

Type of Tax Sales in Arizona Counties

Each of the 15 counties in Arizona conduct auctions for Tax Lien Certificates with a peak 16% Interest Rate. The face value of each Tax Lien Certificate is the total of Taxes, interest penalties, and other costs associated. The Tax Lien Certificates are then bided down by the interest rate. So, the bidding starts at 16% and declines with each bid. The auctions take place in February each year.

When are the auctions held?

Arizona auctions are held in February each year.

The Tax Lien Process in Arizona

In Arizona, rather than bidding on the property itself, you are really bidding on the right to collect interest on default property taxes. The amount of interest received is determined by the winning bid at the auction. The holder of the certificate also can choose to pay following year’s property taxes. This is a benefit because, that money also collects the same rate of interest on the certificate. This will also keep you as the sole lienholder on the property. The former owner or anyone who holds an interest in the property may redeem the lien against the property within 3 years. This is known as their “Right of Redemption.” To redeem the lien against the property, the former owner must pay the total of the face value of the tax lien, accrued interest, and any other costs associated. If the Tax Lien Certificate is not redeemed within 3 years, the property itself can be foreclosed upon. The holder of the certificate must initiate this judicial foreclosure. It is basically foreclosing the “Right of Redemption” the former owner has held for the first 3 years. This is the last chance the former owner has to respond. If they do not, then the holder of the certificate will receive a “Treasurer’s Deed” to the property and all interests held by the former owner are extinguished.

The holder of the certificate may also choose to wait 5 years from the time the certificate was sold, and automatically get a deed to the property. Even if the property is redeemed, which will most likely be the case, you still receive a very high interest rate of 16%. If the Tax Lien Certificates are not purchased by anyone at the auction, they are issued to the state. If you buy a Tax Lien Certificate after it is issued to the state, you will get the maximum 16% interest rate.

Here's an example of how a TLC purchase could work in Arizona:

Tax Lien Certificate Face Value: $2,000.00

Bided Interest Rate: 15.5% (this means the interest rate was only bided down 50 basis points)

Recording Fee's: $20.00

So, the investor paid $2,000.00 plus the recording fee of $20.00. Let’s say the former owner redeems the property after 2 years. The former owner would owe the total of:
$2,000.00 @ 15.5% interest for 2 years
$20.00 recording fee
This comes out to $2,640.00 that will be reimbursed to the holder of the certificate.

Maricopa County, Arizona Tax Auction Statistics

• In 2008, a total of 20,401 Tax Lien Certificates were sold at an average interest rate of 7.64%.
• In 2007, a total of 15,972 Tax Lien Certificates were sold at an average interest rate of 7.96%.
• In 2006, a total of 13,479 Tax Lien Certificates were sold at an average interest rate of 6.03%.
• In 2005, a total of 12,515 Tax Lien Certificates were sold at an average interest rate of 5.80%.
• In 2004, a total of 14,065 Tax Lien Certificates were sold at an average interest rate of 6.09%.