Factors Influencing Interest Rates on Delinquent Property Tax Certificates

Posted: 30 Sep 2003

See all articles by Marcus T. Allen

Marcus T. Allen

Florida Atlantic University - Finance & Real Estate

Sheri Faircloth

University of Nevada, Reno - College of Business Administration

Ali Nejadmalayeri

University of Wyoming - College of Business

Abstract

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 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 signiciantly 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.

Suggested Citation

Allen, Marcus Tillman and Faircloth, Sheri and Nejadmalayeri, Ali, Factors Influencing Interest Rates on Delinquent Property Tax Certificates. Available at SSRN: https://ssrn.com/abstract=417784

Marcus Tillman Allen (Contact Author)

Florida Atlantic University - Finance & Real Estate ( email )

2912 College Ave
Davie, FL 33314
United States
954-236-1063 (Phone)
954-236-1298 (Fax)

Sheri Faircloth

University of Nevada, Reno - College of Business Administration ( email )

Reno, NV 89557-0016
United States
775-784-6993 ext. 305 (Phone)
775-784-1769 (Fax)

HOME PAGE: http://www.scsr.nevada.edu/~fairclos

Ali Nejadmalayeri

University of Wyoming - College of Business ( email )

1000 E. University Avenue
Laramie, WY 82071
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,108
PlumX Metrics