Introduction to The Journey of Bid-Down Ownership to Bid-Up Premium Bidding in Louisiana with Stephen Morel
Brian Seidensticker, CEO of Tax Sale Resources, hosted a podcast with Louisiana attorney Stephen Morel, Founder and CEO of JurisDeed. Morel is also an active member of a committee in his state researching the possibility of changing the current tax sale procedure in Louisiana. The most intriguing potential outcome – which would require an amendment to the state’s constitution – is that Louisiana could convert its current bid-down process into a bid-up premium auction system. The podcast focused on that potential change and on innovative investor tools and solutions offered by JurisDeed that help with the notification process, regardless of what state investors operate in.
Louisiana’s Unusual and Antiquated Bid-Down Ownership Method
Whereas traditional bid-down tax sale auctions start at the maximum interest rate payable to the investor and go down from there – sometimes to zero or no interest paid – Louisiana’s system is quite different. Louisiana tax sales occur annually, typically in May or June. Under current Louisiana law, the sale normally follows a bid-down process in which the tax collector sells the least amount of the property that someone is willing to buy for the total amount the delinquent taxpayer owes. In other words, the bidding starts on 100% of the property and goes down based on the percentage or portion of the property the bidder is willing to buy.
Why an Ownership Bid Down Style Doesn’t Work
The bidding could go as low as 1%. For example, if you are only willing to buy as little as half of the property, you could bid down from 100% of the property to 50% of it. If you were to win that 50% percent bid, you’d get half the property. As you can see from this example, the investor in a Louisiana tax sale auction can potentially end up being a co-owner of the property − with the delinquent taxpayer being the other co-owner. Other rules stipulate that the tax collector, on the day of the sale, will sell the portion of the property that the delinquent property owner designates. Suppose they don’t establish sufficient property to cover their debt. In that case, the tax collector will sell the least quantity of the property that any bidder offers to buy for the amount the property owner owes in taxes, interest, and related costs.
Options for a New Bidding System in Louisiana
While constituents and legislators in Louisiana consider whether to change that somewhat quirky process and shift to a more traditional bid-up premium auction system, one aspect of their discussion is interest payments. They might propose a system that returns the premium to the investor – with or without interest. Whether or not the investor could earn interest on the premium portion of their bid – and how much they might earn – is undoubtedly a hot topic. They could also structure a system whereby the property owner who loses their property to a tax sale foreclosure may be entitled to whatever excess funds are left after the auction and the subsequent payment of delinquent debt. See more information on changes post the Tyler v Hennepin County Supreme Court decision in this blog.
What to Expect in Louisiana
Many changes in Louisiana are expected in the next couple of years as the Bayou State navigates an antiquated system and prepares for any backlash from the Tyler v Hennepin County Supreme Court decision. Check out a follow-up interview with Stephen Morel for the most up-to-date information.
