Bill in Michigan Seeking to Cancel Second Auctions of Tax Foreclosed Properties

There is a bill in Michigan State that is seeking to cancel second auctions of tax foreclosed properties as these are leading to “scavenger” sales. Speculators are picking up houses for a song and then flipping those – netting handsome profits. The problem is particularly acute in Flint.

By this process the property goes through foreclosures many times – the delay causing more neglect and blight. In this year’s clutch of tax foreclosed units 10% of the units had already undergone foreclosure at least once and sold off at a second auction. The present law encourages the buyers to wait till the second auction so as to lay hands on the unit for cheap without paying the arrear taxes.

Doug Weiland of Genesee County Land Bank (executive director) said “It’s easier to gamble with a couple of hundred dollars than it is with a couple thousand”.

If the second auction is eliminated the people will be interested in participating in the first auction. By paying more the buyers would have more interest in looking after their properties and or sell them to others who too would be interested in maintaining the property because of having paid a higher price; this is the logic in theory.

Terry Hanson of Genesee Landlord Association (executive director) gave his support to the idea of eliminating the second auction where no minimum bids were mandated. He informed that speculators coming from outside the state, have bought units near his own and he has seen for himself the units being dragged through the foreclosure process.

He bemoaned, “Now the house is falling down. If (the county had) it auctioned to the highest bidder right off the bat, it would probably be their best shot”. He added that the Land Bank would have a surfeit of properties if fewer numbers were sold at the auction.

Weiland argued that many houses were going back to the Land Bank – but only after going through a long stretch of neglect. He stressed, “We either get them back now or we get them two or three years later after more tax foreclosure. We’re trying to discourage that from happening”.

In the inventory of the Land Bank there are nearly 6,200 units but of these only 2,000 are residences. However more properties are coming to the Land Bank from foreclosure and also from outside Flint.