Is there a more complex and confusing tax sale process than that of Alabama? Certainly not. The intricacies vary from county to county as the state endeavors to establish a clearer tax lien system with a definitive end to the lien redemption period. For investors willing to navigate this uncertainty, Alabama offers solid returns on tax sale investments and can significantly boost your portfolio of rental properties.

Once a property is acquired through a tax sale, the biggest challenge is often securing title insurance.

Before delving into why obtaining title insurance can be nearly impossible without Tax Title Services, let’s explore what makes the tax sale process so perplexing.

Redemption Period for Alabama Tax Lien Sales

Historically, Alabama has relied on selling tax sale certificates as the primary method for collecting unpaid property taxes. The original process, still used by half of the state’s counties, begins with the sale of a tax sale certificate that includes a three-year redemption period.

A notable aspect of these certificates is that after the first year, investors can collect rent from the property’s tenant. The certificate holder can also make essential repairs to the property, with the costs added to the final tax lien redemption amount. In most other states, tax lien purchasers cannot collect rent, making Alabama’s system highly advantageous for investors.

Frequently, delinquent taxpayers abandon their properties, unable to cover both repair costs and back taxes. After the three-year redemption period, the certificate can be exchanged for a deed to the property.

However, celebrations might be premature, as a significant hurdle remains.

3 Year Holding Period Beyond The Initial Redemption Period

The downside of purchasing from counties that use the outdated tax sale certificate process is that investors must maintain possession for three years after acquiring the deed.

Consequently, they could wait up to six years before fully benefiting as property owners. Investors can collect rent during this period, but selling or refinancing the property is challenging.

Moreover, no title company will provide title insurance without a quiet title action or a Tax Title Services Certification.

This is a broad description of the nuances within Alabama’s old tax sale certificate process.

The system leaves considerable ambiguity, allowing challenges from prior parties of interest.

Alabama’s empathetic stance towards distressed taxpayers adds another layer of risk for investors. Such factors have fueled a shift in the tax sale process.

An Updated Redemption Period for Some Alabama Counties

Many counties have transitioned to a new tax lien sale process for delinquent property taxes, which is more straightforward than the previous tax certificates.

In this system, a tax lien with a three-year redemption period is sold at the tax sale. Investors earn interest, and if the lien is not settled within three years, they can foreclose on the property.

This approach is more uniform and common nationwide. Investors cannot collect rent or make repairs, making this a safer investment, but with less upside than tax certificates.

What Happens After The Redemption Period?

Despite their differences, both methods share two key similarities: investors earn interest on their investments, and both require either a quiet title action or Tax Title Services certification for title insurance.
A growing number of investors are turning to Tax Title Services (TTS) certification as an alternative to a quiet title action.

Unlike the traditional judicial process, TTS conducts a non-judicial review of tax sales that is widely recognized by title agents throughout Alabama.

The TTS certification process takes about 90 days, a stark contrast to the extended timelines of quiet title actions.