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Alabama Law for You

  • Writer's pictureGregory Stanley

Why do I want to buy a tax lien at auction in Alabama?

Updated: Apr 28

$. Alabama property tax revenue is how county governments pay for services such as schools.  Investors earn interest on the liens, and if the liens are not redeemed the investor may foreclose and quiet the title on the real property. The largest ever tax lien auction in Alabama will be held 14 May 2024 selling more than 6000 Jefferson County Tax Liens. You can sign up here.

What is a tax lien certificate auction?

The Alabama tax lien auction is the annual public online sale of liens on real property for delinquent property taxes. The first tax lien sales in Alabama were in 2019. County auctions can start as early as 1 March of each year and the winner of each parcel at auction is the person that bids the lowest interest rate.   

Tax Lien auctions are different from tax certificate auctions, which are in-person sale of tax delinquent real property for the highest amount of money bid.  Regardless of the type of sale, without these funds Alabama counties would not be able to function.

What authorizes the County to hold a tax lien auction instead of in-person tax certificate auction?

AL Code 40-10-80 et seq. (2023) provides the county with the choice of using either the sale of a tax lien or the sale of property to collect delinquent property taxes each year.  For a list of counties, dates, and type of auction you can go here.

What are the other laws regarding tax lien auctions?

The Code of Alabama Title 40, Article 7, 40-10-180 through 40-10-200 (Act 2018-577) can be found at Legislative Acts | Alabama Secretary of State. The law was amended in 2022 and 2023, and will be amended again in 2024, with each amendment improving the process and effectiveness of the Alabama property tax lien auctions.

Where are Alabama online tax lien auctions held?

All Alabama counties that have online auctions use  You can go to Govease anytime to learn how to register, prepay a deposit for bidding, and on the day of the auction bid on online tax lien certificates.

What properties are included in the tax lien auction?

Liens for all tax delinquent properties in the county are at auction. A list of available properties will be made available by the Revenue Commissioner’s office each year. You can get a list of lien properties from the County revenue commissioner or tax collector’s office.  Govease also publishes the list well before the date of the auction.

When and where will the tax lien auction list be advertised?

Each county website has the date and time of their auctions posted well in advance of the sale. Additionally, investor groups such as The Alabama Tax Lien Association and consolidate the information for the 68 Alabama property tax auctions and publish it on their member pages.

Where can I find information about the properties?

All of the information on the parcels is available on Parcelfair. (Free Parcelfair videos on tax lien auctions here.) All Alabama counties have taxpayer portals and GIS Maps available online that have the property locations and other information.  Organizations such as the Alabama Tax Lien Association (ATLASS) have monthly meetings to discuss strategies and how to find, research, and buy tax liens and tax certificates.

What are the requirements to register for the tax lien auction?

You must provide identifying information, read and sign that you understand the process, limitations, and requirements, and you must pay a deposit of 10% of the value of liens you intend to buy. Govease has instructions and training here.

How much do the liens cost?

The cost of each tax lien is already set and includes all taxes, interest, penalties, fees, and costs due on the property as of the date of the auction. Bidding is not based on the amount of money the buyers of a tax lien are willing to pay. Bids are based on interest rate the buyers are willing to accept on the lien.  

Bidding starts at 12% and decreases in 1% increments until no bidder continues to bid lower or until the interest rate reaches 0%. Many people can bid 0% and the Govease system randomly chooses who wins among those who bid 0%.   Pre-bidding is available at some auctions, and others require live bidding on one parcel at a time. Parcelfair statistics show the most common bid is 6%.

What do I get after I win a tax lien auction?

After the tax lien auction is over, winning bidders will receive Bid Reports with a list of parcel numbers purchased and the corresponding amounts due. Within 10 business days of the close of the tax lien auction, a tax lien certificate in the name of the winning bidder that shows the winning interest rate will be mailed to the purchaser. The certificate will also include the auction date, assessment year to which the tax lien relates, and the value.

Does the tax sale clear the title on the property?

The sale of a tax lien does not extinguish any deed restriction, deed covenant, easement on or appurtenant to the parcel. A tax lien purchased from the County has higher priority than other existing liens on the property, but it does not automatically destroy other liens.  After three years an investor with all three tax liens can foreclose on the property if it has not been redeemed. Stanley & Associates handles these foreclosures and completed the first Tax Lien Foreclosure in the state of Alabama. Free Alabama Real Estate videos a

What other costs can I expect when I win.

None. The costs of the lien will include all the costs associated with the auction process including a $20 origination fee, $20 auction fee, and a $5.00 certificate fee. A redemptioner must pay the county the amount of the lien plus the interest earned after the auction to redeem. A tax lien certificate holder may foreclose on the owner’s right to redeem after the third anniversary of the sale as long as the investor holds every tax lien certificate sold on the property.

What is the "First Right?"

The winning bidder has the right to buy all subsequent year's tax certificates at the same interest rate as the first. The first right to buy the subsequent liens is critical, because in order to foreclose you must have EVERY tax certificate issued on the property. Read about Alabama's first right here.

Can I sell my tax liens to other investors?

Yes, a tax lien certificate may be transferred and assigned to another party according to AL Code § 40-10-187(e). The process is similar to assigning tax certificates, and while the code does not require that an attorney handles the transfer, any investor should have an Alabama lawyer review the transaction to ensure it is legal and the seller actually owns the lien.

Do tax lien certificates expire?

Yes, a tax lien expires at ten years if it has not been foreclosed upon.   The law regarding tax lien certificate auctions has changed each year since this auction system was authorized so make sure you are using current information.

Who can redeem a tax lien that has been sold at auction?

Anyone with a legal interest in the property can redeem. Tax liens may be redeemed by the owner of any part or the property, their heirs or a personal representative, plus any mortgagee, or anyone described in § 40-10-120(a).

What are my chances of winning a tax lien auction?

More tax delinquent parcels have sold at auction every year since the lien auction system has been in place. While that's bad because it means more people are not paying their taxes, it also means there are more opportunities for investors. According to Parcelfair, since 2020 the number of parcels at auction has almost tripled in Jefferson County, Alabama and the average interest rate earned in Jefferson County last year was 7.75% compared to 8% under the old system. This means on average, delinquent tax payers are paying just as much interest as under the old system.

Statistically the auction system has created a regressive tax burden because interest rates are bid lower on higher value properties while interest rates on less valuable properties are higher. However, the auctions in 2024 are setting records in the number, and value, of tax liens sold in Alabama.

When can I start foreclosure on a tax lien bought at auction?

At any time not less than three years (but not more than 10 years) after the auction we can start an action to foreclose the right to redeem and quiet title to the property in the name of the holder of all the tax lien certificates.

What are my chances of foreclosing and owning the property outright?

There have not been many foreclosures because not all Alabama counties have been using the lien system long enough (three years) to have foreclosures. However, Stanley and Associates is proud of their 100% record in foreclosing and quieting title under the new lien system in Alabama.

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