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  • Resources Alabama Home Equity Theft Laws
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  • Appendix: The Data

Alabama

How It Works

Alabama counties have two tax foreclosure methods. Under one method, the government auctions a certificate of purchase to the highest bidder. The certificate does not transfer title, although the certificate holder can take immediate possession of the property. If the homeowner doesn’t redeem the property within three years, the government keeps any excess proceeds from the sale. Because the certificate of sale does not immediately transfer title, these properties often sell for much less than their actual value, meaning that investors also take a windfall.

 

Alternatively, the county may sell a tax lien on the delinquent property. A tax lien allows the purchaser to foreclose on the property and take title and all equity after three years.

 

The Impact

The State of Alabama requires those requesting public records to reside in the state. This requirement has made it difficult for us to measure the size and scope of home equity theft in Alabama.

Why It Matters

In 2009, Thomasyne Eldridge did what many daughters with aging mothers do: she moved her mother, Edna, in to live with her and her husband. When Edna moved, she kept her home in Jefferson County, Alabama, but the post office failed to forward her mail. She never paid her 2011 property taxes because the bill was not forwarded to her daughter’s address, and Edna believed she was exempt because of her age.1

In 2018, out of nowhere, Thomasyne was contacted by a company that said it held a tax deed to her mother’s property. A representative told her that Jefferson County had sold Edna’s home to the company on May 22, 2012, because the 2011 property taxes had not been paid.2

In Alabama, if someone underpays his or her property taxes, the county can sell a tax deed for the overdue amount to the highest bidder. If the delinquent owner cannot afford the payment required to reclaim full ownership of his or her property before the redemption period expires, the tax deed holder, a private investor, eventually gets full ownership.

Until the buyer contacted her, neither Thomasyne nor Edna knew the property had been sold to pay off delinquent taxes. If Edna had received a notice about the tax sale before May 2012, she or her daughter could have easily paid what she owed to prevent her home from being taken and sold.3

The total taxes and interest due when Jefferson County sold the tax deed on Edna’s home was $2,047.91. Jefferson County sold the tax certificate for $21,047.91. The county pocketed the $19,000 difference between the amount Edna owed and the amount for which it sold the tax deed. Edna did not receive a penny, and her actual loss was far higher.4

According to Jefferson County’s assessment, Edna’s property was valued at more than $127,000 at the time of sale. In other words, the county took $19,000 in equity and the purchaser of the tax deed got the remaining $126,000 in equity that Edna had built up in her home over 30 years—all to cover a $2,000 debt of which she was not aware.5

Around the time Thomasyne learned about the property transfer, the company that held the tax deed to Edna’s property filed a lawsuit asking the court for full ownership. Thomasyne was unaware that she had the right to redeem her mother’s property, but even if she had known, she could not have afforded the redemption payment at this time. The original $2,000 debt had ballooned to over $30,000 due to punitive interest and fees over six years.6

Thomasyne and her husband filed for bankruptcy a month later. The extra time and expenses involved in Edna’s care over the previous nine years resulted in tremendous financial stress, and they struggled to make ends meet. The couple fell so far behind on their own bills and property taxes that they had to file for bankruptcy to save their home from foreclosure.7

The extreme financial stress that Thomasyne and her husband experienced could have been avoided. Had Jefferson County not taken Edna’s home, Thomasyne could have rented or sold it for extra income. If Thomasyne had known about her mother’s house being sold for taxes in time, she could have afforded to redeem the property in 2012 when the debt was still manageable.8

A few months after the notice from the private investor, late in 2018, Edna passed away.

The $125,000 surplus from the tax sale that Jefferson County and the private investor pocketed represents home equity theft. The Fifth Amendment to the U.S. Constitution forbids the government from keeping more than what is owed. The county and the private investor must return these funds to Edna’s heir, Thomasyne.

1 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019, Ala. Code § 40-9-19(a)(2) (2022).

2 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

3 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

4 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

5 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

6 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

7 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

8 Affidavit of Thomasyne Eldridge, State of Alabama, October 25, 2019.

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