Understanding Alabama Tax Sales: Old vs. New Systems
Alabama ad valorem tax sales have undergone major changes in recent years, creating two distinct systems: the “old” tax certificate/deed system and the “new” tax lien system. Understanding the differences between them is crucial for investors looking to profit while managing legal and financial risks.
The Old Alabama Tax Sale System
Before 2019, every county in Alabama used the traditional certificate-based system. In this setup, winning bidders at a tax sale received a tax certificate.
After three years, the certificate could be converted into a tax deed for a small administrative fee—just $5 paid to the county. However, obtaining a tax deed did not automatically grant the investor clear title. It simply gave them more rights than a certificate holder. A quiet title step was necessary to get insurable title.
One major advantage of the old system was that certificate owners could take possession of the property immediately after purchase. If the property included a residential structure, investors who made improvements could recover the value of those improvements—along with taxes and interest—if the original owner later redeemed the property. That’s right, I said “value,” not “cost.” Spend $10,000 and increase the value by $25,000, it it’s the extra $25,000 you get.
The New Alabama Tax Lien System
In 2019, a new tax lien system was introduced in select counties and has since expanded across most of the state. Under this system, investors receive only a tax lien, not a certificate—and therefore have no rights to possession of the property.
Currently, if four years have passed since the first lien sale, and the investor holds all intervening years’ liens, they may file a foreclosure lawsuit. Upon completion of that lawsuit, the investor is granted clear, insurable title to the property.
Navigating the Path to Profit
Both systems are still in play, depending on the county and the year of the sale. Even for counties that have switched to the new system, investors can still make inexpensive secondary market purchases of certificates under the old system.
The rewards of Alabama tax sale investing can be substantial—but the process is complex and filled with legal nuances. Successful investors take the time to learn the system, understand redemption rights, and follow proper legal procedures before making a move.
To deepen your understanding and avoid costly mistakes, explore our tax sale investing educational products here.
About the Author
Denise Evans is a commercial real estate broker, distressed property investor, and the acknowledged expert on Alabama tax sales law. She is the author of Alabama Tax Sales, now in its 19th year of annual updates, widely used by investors, attorneys, and county personnel across the state.
