Tax certificates to be sold at 18% interest – first come, first served

ORLANDO, Fla. – June 5, 2008 – After its tax certificate auction failed to attract bidders (http://www.floridarealtors.org/NewsAndEvents/n1-060408.cfm), Orange County yesterday announced a new auction but with different rules: Whoever steps forward to buy a tax certificate will earn 18 percent interest on the money once the owner pays.

Local governments had not had trouble selling tax certificates, and they have no backup plan for combating the problem. The Grant Street Group, which handles the auctions, says inland counties have been hit hard, with Leon and Marion counties failing to sell about half their certificates; and Highlands County didn’t do that well.

Investors bid on tax certificates as an investment, with the winning bidder offering to charge the lowest interest rate. The maximum interest rate is 18 percent; the minimum is 5 percent. In the past, competition for the investment generally kept the interest rates close to 5 percent. However, a lack of demand, oversupply of delinquent taxes and an investor fear of the housing market have changed the fundamentals. About 15,000 tax certificates failed to sell in Central Florida, for example, with 3,277 of them in Orange County. Tax certificates that did sell this year generally went for 10-12 percent.

By selling the tax certificates, local governments get immediate payment of past-due taxes.

Source: The Orlando Sentinel, June 5, 2008, Mary Shanklin

© 2008 FLORIDA ASSOCIATION OF REALTORS®

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