So here in Michigan another season of tax sales has commenced. These are mostly undesirable vacant lots or lots with dumpy houses that need to be bulldozed. These properties reverted to the county treasurers due to unpaid property taxes. They are offered to the public at auction.
Last month I noticed one of the auction signs go up on a lot in my neighborhood! It is a large builable wooded lot on a ravine with deeded lake access (not frontage) and listed for $2100 minimum bid. Intrigued I signed up, researched the property and made a proxy bid. Come auction time I was certain to be outbid by another neighbor or builder. Going once twice sold to CHela! My first reaction was disbelief, I was the only bidder! Now I am a land baronetness, woot!
So now, unsold properties go to a second round, they are auctioning off properties at no reserve or a minimum bid of just $100. That’s right $100. I am crawling all over the web site tax-sale.info searching for land I might grab. Did see a charming single story old house, empty, sitting on an acre on a chain of lakes for a $100 min bid. Too far out…
How about Crystal Lake in Benzie County in Northern Michigan? A nice older home in a million dollar neighborhood, with an SEV of $450,000 is on the auction block for a minimum bid of $100. Not a typo just an oversight by the bank who was foreclosing on this house and did not pay their property taxes. So the county foreclosed on the bank! And now it is up for auction, I am sure there will be a bidding war on this parcel, I will be watching but not bidding, I can’t afford that summer tax bill on such a place.
It seemed like a scam, bid $100 or more on a half-million dollar house and you might get it!
There are sometimes jokers in these processes. We looked at a pair of commercial buildings in our town that went up for tax auction, with the possibility of getting a $1.5M piece of property for around 10 cents on the dollar. However, there’s a complicated process by which (1) you pay your entire bid and (2) are nominal owner of the building which means (3) all responsibilities and problems and costs thereby appended to… but (4) the sale is not final for six months and any interested party (owner, bank, loan agent, etc.) can buy the property for $1 more than your bid, at any time up to close.
You’d have to have very deep pockets to take on that kind of obligation with every chance of it being pulled out from under you with no remuneration for upkeep, taxes, etc.
Needless to say, we passed. Everything I saw and heard about the property for the next few months (the town building inspector is an acquaintance) made me stop and invent a minor god to thank we didn’t bite that poisoned apple.
Marquette County , Powell Township on County Road KCI, just across the street from Lake Superior. Must pay summer tax bill in 20 days or your deed will be held up.
That’s the plan! wish I had deeper pockets, want to go halfsies?
Wo, buyer beware! I did see some parcels that required you demolish the house right away. One home looked gorgeous, painted Victorian with a wonderful exterior, but it had to be demolished according to the county treasurer. Must’ve been rotted out on the inside, still had original front door, would want to salvage the good stuff.
One thing to consider is that you paid $100 for it; however, the assessed value is much, much more. Therefore you’ll be paying a LOT of property tax every year.
Also by time they auction off properly it has already gone through a process where tax buyers have a chance at the property. At least this is true in Illinois and many other states. These tax buyers bid on the property and if they win they have the opportunity to get back taxes plus interest from the property owner. If the property owner doesn’t pay up, then the tax buyer owns the property after a long amount of time and a lot of legal paperwork. Most of the time they actually want the property instead of getting paid for the back taxes.
These tax buyers are professionals for the most part. If they didn’t want the property, there’s a very good reason for it: they won’t make a profit. So if a tax buyer didn’t want the property and it fell into a tax sale, the property probably has little or even negative value.
This. In 99.99% of the cases, pros or professional investors have looked at the property and will either make an attempt at a winning bid (well over trivial minimums) or won’t bother. If it’s left to amateurs and local bidders, there’s a very good reason for it.
That reason COULD be that properties in the comparative boonies are a huge hassle to manage, develop and sell. A local buyer/rebuilder/seller MIGHT be able to make a profit because of their local anchor and focus. Value is relative.
But on the whole, if the pros aren’t interested, you need to find out why.
ETA: There is also the middle ground of “semi pros” who have more money than most individuals and have read one or more books about how to get rich flipping RE. If they also aren’t interested… run.
I see what you are saying, but in Michigan by the time the public auction occurs the courts have severed all previous owners interests or liabilities, the properties are owned by the county. The county may have some stipulations about the property, I think in greater Detroit area, some parcels may require a business plan etc.
And another thing these properties remain uncapped, or even if bought at a fraction of assessed value their property tax rates remain unchanged until the parcel is sold again.
At least that way the governing units can get appropriate tax income out of the deal.
