Thursday, June 19, 2014

Tax Auction Properties Revoked for Taxes




Wayne County Treasurer Ray Wojtowicz has filed suit to get back about 80% of the properties sold in the 2011 Tax Auction...because their new owners haven't paid their taxes.  It would be funny ironic if it wasn't sad.  Let me explain.

As the Detroit News talks about, part of the issue is buyers who buy up large amounts of properties and don't pay any taxes on them (or probably put any other money into the properties) before they flip them to some other buyer.  Some of these sales are on a land contract, so the deed (and taxes) would still be in the name of the auction buyer even if they sold their $500 purchase for $3,000.

This gaming of the system has been known for some time.  We discussed it on this blog last fall, in the middle of the last tax auction, here and here.  Bulk buyers are not in it for the long term.  These buyers might not even know where these properties are and might not have ever seen them in person.

But that is not always the case.  We shared with you the story of an intrepid guy who bought one of these $500 auction houses because it was what he could afford to buy.  He struggled with his finances, his lack of rehab skills, and issues in the neighborhood, but he emerged with a livable house he could call his own.

If bulk buyers are letting properties go again, then it means that the properties were not worth keeping.  Since these are 2012 taxes we are talking about, this means that decision was made almost immediately upon purchase and did not change.

More than anything, these reversions are evidence that our tax auctions need revision.  If 80% are failures, then the system is not working for our community.

Wayne County has had a staggering number of tax foreclosures in the wake of the 2008 downturn, and Detroit has been hit particularly hard.  The tax auction may be the best response to an unworkable situation, but some tweaking (as has been done since 2011) is needed.

Links:

Treasurer sues auction buyers for unpaid taxes:  http://www.detroitnews.com/article/20140619/METRO01/306190041/Wayne-County-wants-reclaim-78-sites-sold-tax-auction-since-11

Tax houses owe taxes: http://downriverhomes.blogspot.com/2013/09/tax-auction-houses-owe-taxes-again.html

Tax houses owe taxes (part two): http://downriverhomes.blogspot.com/2013/09/tax-auction-houses-owe-taxes-again-part.html

A $500 buyers story: http://downriverhomes.blogspot.com/2014/01/a-500-auction-buyers-story.html