The Real Deal Miami

Big investors dominate Florida’s tax lien market

May 03, 2013 03:00PM

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Tax liens can yield annual returns of 20 percent.

Since discovering Florida tax liens are a good way to make a quick buck, big institutional investors have flooded online auctions with shell companies to do their bidding, the Sun-Sentinel reported.

Florida is the top state seller of liens, certificates that give holders the right to collect back state and local taxes on properties whose owners are behind on payments, the newspaper said.

Lien buyers have to immediately cover the property owners’ tax bill, so that municipalities have the cash to pay employees like police and schoolteachers. When the property owners settle up, the lien buyer collects with interest.

While stock prices remain sluggish, Florida tax liens caught investors’ attention because of their yield – annual returns of as much as 20 percent, the paper said.

Using proxies with names like Pork Chop Sandwiches and Spiderman Corp., big investors are squeezing small bidders out of the mix.

Until 2005, Florida tax lien bidders had to appear in person, vying for the auctioneer’s attention with gaudy, bright-colored clothing.

Individual investors say the online auctions are unfair, with one investor able to raise through its affiliates tens of thousands of paddles at once.

Palm Tree Tax LLC, formed in 2012 by Hollywood, Fla.-based hedge fund LienBase, now has more than 200,000 affiliates, according to the Sentinel.

Competing against such heft, “the little guys are pushed out,” Fort Lauderdale resident Jason Quinn, who bids as a lone individual, was quoted as saying. [Sun-Sentinel]Emily Schmall

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