Washington DC's tax sale is on. Well, almost. Registration for the District's tax sale auction for property in tax arrears begins on Monday, August 31, and ends September 4th, so don't delay - act now - to get your next house on the cheap. The auction of delinquent properties will take place starting Wednesday, September 9th, and continue until all properties delinquent as of October 1, 2008, have been sold.
Property with less than $1,000 in back taxes may be put on the block to a willing bidder. So is this the place to pick up the home you thought you couldn't afford? Not really, says David Kanstoroom, a title attorney with North American Title. Because the District provides a statutory right of redemption (an American value, you know) for auctioned properties, wayward owners may pay the back taxes, penalties and interest, and in so doing reclaim the property. "A high rate of these properties - 90 plus percent - are ultimately redeemed by the original owner" says Kanstoroom. According to Andrew Schechter of M and M Search Service, a title search abstractor and auctioneer, the point of the auction is often not to obtain title to a property, but to invest in a distressed property and collect interest from the previous homeowner.
Auction participants, who technically purchase the lien on the property, not the actual title, are entitled by DC law to earn 1.5% interest, per month, on the tax lien amount, to the homeowner that wants to redeem the property. Investors are therefore bidding on the amount of the tax lien, plus whatever surplus they determine the investment will justify.
Schechter notes that 4 months after the tax sale, investors can begin charging homeowners for actual title search costs, and 6 months after the tax sale they can begin charging "reasonable" attorneys' fees, a point at which the real money may kick in. Because the process is judicial, rather than administrative, the length of time to process the sale is determined by the court, but a case cannot be opened until 6 months after the tax sale.
Homeowners will still have to contend with penalties by the District, and any other outstanding liens, but according to Schechter, the District's intent is not to make tax sales an easy route to home purchasing. While it may be easier in Maryland, where the homeowner conducts the same type of transaction directly with the state, rather than a private investor, Schechter says the message from the DC government is simple: Don't attend the auction to pick up the home, go for the high interest accrued on the delinquent taxes. If its ownership you're looking for, you'll just have to go about it the old-fashioned way and search online.
The sale will be held at 941 North Capital Street, 4th floor.
Wednesday, August 19, 2009
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2 comments:
IT's too bad DC's law structures it this way. Many of the delinquent properties would be better off in the hands of someone who wanted to rehab it and live in it. Not all of them, of course, but it really should be a better vehicle to getting properties into the hands of new owners. AS it is the taxpayer has to be 18 months delinquent or so before the property goes on the block, so it's not like there's not fair warning.
Cancelled! Postponed until further notice! Some guy at www.dctaxsales.com has put up someting to let folks know the rescheduled date.
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