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State Auction Process in Connecticut

Connecticut operates as a redeemable tax deed state, which means that properties are sold after tax foreclosure, and the former owner has an opportunity to redeem the property by paying the delinquent taxes.

When a property becomes tax delinquent in Connecticut, the tax collector can sell it at a public auction or initiate a tax foreclosure process. If the property is sold at auction, the winning bidder receives a tax deed. However, the former owner has a redemption period of 6 months to reclaim the property by paying the delinquent taxes.

If the property owner redeems the tax deed within the 6-month redemption period, the investor who purchased the deed at the auction receives their capital investment back, along with an 18% annualized return. A 6-month redemption period would result in a 9% return. Essentially, the investor is compensated for their investment plus interest.

If the property owner fails to redeem the tax deed within the specified redemption period, the investor becomes the new owner of the property. In this case, the investor gains full ownership and control of the property.

Connecticut law requires the tax collector to provide notice to the taxpayer (property owner) before the tax sale. The taxpayer will receive multiple certified mail notices at different intervals, providing them with ample time and opportunity to address the delinquent amounts, including interest, fees, and costs associated with the tax sale. The collector will send you:

1.Notice by certified mail, not more than 12 weeks and no less than nine weeks before the sale 2.A second notice by certified mail, not more than eight weeks nor less than five weeks before the sale, and 3.A third notice by certified mail, not more than four weeks nor less than two weeks before the sale

Foreclosure in Connecticut

Foreclosure in Connecticut follows a judicial process, and there are two main types of foreclosure:

i) Foreclosure by sale – Foreclosure by sale is the typical type of judicial foreclosure. It is ordered by the court when there is equity in the property, meaning that the total amount of liens against the property is less than its fair market value. The property is sold at the foreclosure sale, and the proceeds are used to satisfy the outstanding mortgage debt and any other liens.

ii) Strict Foreclosure: Strict foreclosure is an alternative foreclosure process used when there is no equity in the property or if there are federal tax liens on the property being foreclosed. In a strict foreclosure, the court transfers the title of the property directly to the lender or another party without a foreclosure sale. This process allows the lender to take ownership of the property.

Now that we know about the types of foreclosures, we should also know when and how often each is used.
The decision to proceed with either foreclosure by sale or strict foreclosure depends on the specific circumstances of the case, particularly the presence of equity in the property. Foreclosure by sale is more common when there is equity, while strict foreclosure is typically used when there is no equity. In most cases, a foreclosure by sale is ordered by the court when there is equity in the property. This means that the total amount of liens against the property is less than its fair market value. Another situation where foreclosure by sale may be ordered is if there are federal tax liens on the property being foreclosed. On the other hand, if there is no equity in the property, the court will typically order strict foreclosure as the alternative method.

Foreclosure Process in Connecticut

Here’s an overview of the foreclosure process in Connecticut:

1. Foreclosure Lawsuit: When a borrower defaults on their mortgage payments, the foreclosing lender initiates foreclosure by filing a lawsuit, known as a “complaint,” in court. The borrower is served a copy of the complaint, and if they fail to respond, the lender will obtain a default judgment.

2. Litigation Process: If the borrower responds to the lawsuit, the court will proceed with the litigation process, which involves hearings, motions, and legal proceedings. The court will consider the evidence and arguments from both parties before making a decision.

3. Judgment and Sale Date: If the lender is successful in the lawsuit, the court will enter a judgment against the borrower and establish a sale date for the property. This sale date marks the foreclosure sale, where the property will be sold to the highest bidder.

Summary

1.Connecticut operates as a redeemable deed state in tax sales.
2.In a redeemable deed state, when you purchase a property, the delinquent owner has the right to pay off the taxes during a redemption period.
3.This differs from a tax lien, where you only purchase a lien on the property, not the property itself.
4.The minimum bid at a tax auction in Connecticut is determined by the county where the property is located.
5.The minimum bid is based on the total amount of taxes, interest, fees, and other charges due on the property.
6.The highest bidder at the auction becomes the winner and gets the property.
7.After the auction, the tax collector prepares and signs a deed to transfer ownership to the winning bidder.
8.The deed is not immediately recorded but held for a six-month Redemption Period.
9.If the property is redeemed by the delinquent owner during the Redemption Period, the deed is discarded.
10.In such cases, the investor receives a return of 1.5% interest per month during the six-month period.
11.If the property is not redeemed within the Redemption Period, the deed is recorded, and the winning bidder becomes the owner.
12.Auction registration typically takes place on the day of the auction, and a deposit might be required to bid.
13.Auctions in Connecticut require in-person bidding, although some allow authorized agents.
14.It’s important to check with the specific county to confirm requirements and whether absentee bids are allowed.
15.Tax sales in Connecticut are handled by the county treasurer’s office and take place throughout the year.
16.For more detailed information on Connecticut’s tax foreclosure laws, refer to Connecticut General Statutes Title 12, Chapter 204.
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