Factors Influencing Interest Rates on Delinquent Property Tax Certificates

This study examines the market for delinquent property tax certificates, a commonly used enforcement mechanism in property tax systems around the United States. We model the value of such certificates using a continuous-time framework and propose a statistical model that allows testing for factors t...

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Bibliographic Details
Published inThe journal of real estate finance and economics Vol. 28; no. 1; pp. 19 - 36
Main Authors Allen, Marcus T, Faircloth, Sheri, Nejadmalayeri, Ali
Format Journal Article
LanguageEnglish
Published Norwell Springer Nature B.V 01.01.2004
Subjects
Auctions
Bids
Deeds
Delinquency
Economic models
Economics
Finance
Housing
Interest rates
Investment
Liens
Property
Property taxes
Sales
State court decisions
Studies
Tax collections
Tax rates
U.S.A
United States > US
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Summary:This study examines the market for delinquent property tax certificates, a commonly used enforcement mechanism in property tax systems around the United States. We model the value of such certificates using a continuous-time framework and propose a statistical model that allows testing for factors that affect interest rates charged by investors who purchase the certificates as investment instruments. Using sample data from tax certificate sales in Florida from 1982 to 2000, we find that interest rates on certificates are negatively and significantly related to assessed property value and homestead status, and positively related to local ownership. We find an inverse relationship between interest rates and the number of certificates purchased by the certificate investor, indicating a significant clientele effect in this market. We also find that the implied effective tax rate is positively related to the interest rates charged by investors. Overall, the findings provide insight into the function of this unique market niche.[PUBLICATION ABSTRACT]
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0895-5638
1573-045X
DOI:10.1023/A:1026321506236