Tuesday, October 06, 2009

Tax Delinquency Sale

I have some vacation days that I need to burn (either use them or lose them), so yesterday I took a day to go watch a tax delinquency sale. This is for people who haven't paid their taxes on their property and they are about to lose them. I didn't plan to buy anything, I just wanted to watch.

Having no prior information except a list of properties for sale, I was ill-equipped for the process. I want to go back next year now that I know more. At this rate, I may be prepared to participate in 5 or 6 years. The people that were present looked like some "professional" buyers and some people trying to save their home.

First, there is a lot of protection on the person loosing their property. After all, we don't want to kick grandma out of the house. Taxes were due in January (almost 9 months ago) and notices were sent out last August/September. If taxes aren't paid on time, penalties accrue, then in March a delinquent notice is sent. If nothing is done in 30 days, a Notice of Seizure is sent. If for some reason this can't be delivered, a physical sign has to be posted. Then the notice is placed in the paper (what happens if newspapers go away?).

So after about 9 months, the property finally comes up for auction. But the buyer doesn't get a deed. According to our county website "The defaulting taxpayer, ... or any mortgage ... creditor may redeem each item of real estate within twelve months from the date of the delinquent tax sale." That means if the previous owner or his mortgage company want to, they can come back to the bidder and take the property (by paying all taxes plus interest).

The auction started shortly after 9am (which was good for me as I was late). One thing I had noticed was that there were several property owners who had multiple delinquent properties. In particular, one home builder had 189 properties listed. We didn't go through all of the properties, but went through many. The delinquent taxes were from $498 to $7512. Many properties went for $2000, some went for as high as $5000. I think a single bidder, #136, won all of the ones that were bid. (see below for why some weren't bid).

Some properties received no bids. These will go to the Forfeited Land Commission and be sold via sealed bid later. Some of the properties (not the ones mentioned above) sold for very high dollar amounts, over $100,000.

As mentioned, not all of the homes for a single delinquent taxpayer were sent out for bids. The website mentions that "as soon as sufficient funds have been accrued to cover all of the defaulting taxpayer’s delinquent taxes, no further items may be sold." Here's what I think that means. If you have 10 properties and owe taxes of $498 each, if the first property sells for $5000, bidding on the other nine is suspended. I'm assuming the delinquent taxpayer gets to keep them.

After about an hour or so, I decided I couldn't learn any more and was bored. I decided that the process seems to work, with the county getting taxes, but not necessarily more. The buyers are promised a deed eventually (takes over a year to complete), and are offered some restitution if they lose the property. I definitely want to see more of this, but I'm convinced I won't be buying any property this way for quite some time (after all, the next auction is a year away).

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