Wednesday, December 29, 2010

Private Investors Score Big Profits In Tax Lien Ripoffs As County Process Allows For One Homeowner's $291 Delinquent Tax Bill To Grow To $8,200

In Fulton County, Georgia, The Atlanta Journal Constitution reports:

  • Robin Gordon didn’t know about the tax lien Fulton County placed against her apartment until the county sold the lien to a private company, foreclosed and sold the property at a sheriff’s auction.
  • Now, to keep her property, she must pay $8,200 to satisfy the $291 she initially owed in delinquent taxes and penalties. “It’s just seems too ludicrous to be true,” Gordon said. That’s a profit of 2,700 percent for Vesta Holdings and KOR Holdings, the sister companies that purchased Gordon’s lien, ordered the sheriff’s office to auction her apartment and then bought her property at the auction.
  • While most Georgia counties prohibit this practice, Fulton and Gwinnett counties routinely sell tax liens to private third parties who can pump up the lien value and use foreclosure to collect the debt.
  • Proponents say selling tax liens to private businesses lowers counties’ collection costs. But critics say the tactic is an abdication of a county’s tax collection responsibility, removes due process protections for homeowners and places unnecessary financial burdens on taxpayers. Putting the process in private hands, critics say, flips the creditor’s incentive at the property owner’s expense.
  • County tax collectors are interested in efficient, quick revenue collection, they argue. For-profit businesses make more money by delaying, running up the debt with penalties or foreclosing on the property and selling it at auction.
  • The imposition of taxes is one of the most feared powers of government, and when that power is transferred to a private entity, not only are they not accountable like the government, but their incentives are entirely different,” said Frank Alexander, a law professor at Emory University who specializes in Georgia real estate and foreclosure law. "The investor’s only incentive is to maximize profits.”
  • That is why DeKalb County does not sell tax liens, said Andrew Booth, deputy tax commissioner and director of delinquent collections division. “There’s no accountability to taxpayers and residents by the purchasers of the tax lien,” he said.(1)
For more, see Tax lien sales 
shock, dismay.
(1) For similar "tax lien-inflating" rackets reportedly going on elsewhere, see:



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