In Michigan, properties that have back taxes that haven’t been paid for 3 years go to auction. The properties being listed in 2016 are for owners who failed to pay property taxes for tax year 2013. This year there are a total of 409 properties. Our county treasurer works with homeowners to make payment plans to keep them out of the foreclosure proceedings. Currently there are over 600 people in tax payment plans in the county that would have lost their property to the auction process without this intervention. Without this help there would be over a thousand properties on the auction block. Our county is also one of only 3 in Michigan to take advantage of a new state law that allows county treasurer’s to charge a lower interest rate on delinquent taxes.
The Berrien County Tax Auction List:
The official PDF list is published by our county treasurer about 3 weeks before the first auction. This year it was published on July 1st with an auction date of July 20th. This isn’t a lot of time for planning, so for forward thinkers there are ways to see what properties will go up for auction in advance. One of the nice aspects of the official list is that it includes pictures of the property and the opening bid amounts. The list of properties that are to be foreclosed on are published several times in area papers leading up to foreclosure, with a final notice being published a few days before the foreclosure takes effect. This is a great list to use to look for potential properties. These lists typically include just the address and property ID number.
One of the tools I use when looking at properties on the tax auction list is our counties GIS system. This system will show a virtual plat map of the entire county and the user can select to highlight which properties are tax auction properties and which properties are owned by the Berrien County Land Bank. Unfortunately with the free version the tax auction listing will show properties from the previous year until the new list is published. In order to see upcoming properties the user has to pay for the full version.
For a fee of $15 per day, or $50 per month, the county provides a deluxe version of this service. With the full version the user can enter in any name, address, or property ID number and the system will find those properties. Users can also click on any parcel on the map and find this information. The full version also includes an updated map layer from 2011. The free version only shows the map layer from 2005. This is an amazing tool for looking at land acquisition options.
By paying for the full version the user can search the owner field for “Berrien County Treasurer”, which will show all property currently owned by the treasurer. Not all of these properties will go to auction, but the vast majority will. When I ran a search recently there were around 460 properties found belonging to the treasurer, while the auction list has 409 total properties. Part of the discrepancy is that the county prefers to demolish structures before listing them when possible, so some properties that will be demolished will not be auctioned until the following year.
The Tax Auction Process:
During the first auction the initial bid price is set at the total of all back taxes owed. The winner will also be liable for the 2015 summer taxes due in August. A second auction is usually held about 6 weeks out for properties that don’t sell at the first auction. During this second auction the bidding will start at $50 for each parcel. Winning bids in the 2nd auction will also be responsible for the 2015 summer taxes.
To be a bidder at the tax auction you must register in the hour before the tax auction starts. People who have won auctions and not paid in the past are barred from bidding, as are any potential bidders who owe back taxes in the county. The auction is an all day event, as it takes several hours to run through 409 auctions. The house is usually packed full, so arriving early is a great idea.
This Years Berrien County Tax Auction Properties
UPDATE 9/26/16: There are just over 100 properties are left. The Berrien County Treasurer is selling these properties for $50 each, 1st come 1st served through October 23rd. The buyer is still responsible for the 2016 Summer property tax bill.
UPDATE 8/7/2016: 94 properties sold at the first auction for a record $1.1 Million. The remaining properties are being offered through September 13th for the minimum bid price plus 10%. After that the remaining properties will be sold at the second auction on September 20th.
The vast majority of the properties are in Benton Harbor or Benton Township. This year there are 247 vacant lots, 52 houses scheduled for demolition, 104 houses that are not scheduled for demo, 2 outbuildings, and 4 commercial buildings. Of the 247 vacant lots, 88 are lots that had been lost to tax foreclosure in 2015, but still needed the structures torn down before being auctioned. Properties can only be inspected from the exterior, so for any properties that have homes or other structures on them bidders are taking a massive bet. I did this back in 2008 and lost that bet fairly hard. The bulk of the properties are vacant lots in Benton Harbor or low value houses in Benton Harbor, but there are quite a few properties that stand out this year.
There is one house that is really nice, is currently occupied, in a really nice neighborhood and sits on 7 acres. This house is assessed at having a market value of close to $200,000. The next property is an industrial property with a giant building that is assessed at almost $500,000. The third property that stands out in this auction is a 7 acre chunk of land. It is relatively rare that large chunks of land come up for sale in the auction.
Because properties start out with an opening bid of the back taxes owed, there are many properties that do not sell at the first auction because the back taxes are in excess of what the property is worth. These properties are then sold at a second auction In September. At this auction the opening bid for each property being offered is $50. Occasionally a third auction is held in order to clear out the remaining properties. Properties that remain unsold are subsequently put into the Berrien County Land Bank.
The second auction is where people will get vacant lots and low value homes for the most part. The opening bids in the first auction for most of the vacant lots is around $800. The true market value of these lots is somewhere between $0 and $250 for the most part. They really only have value if you own the house next to them. With that being said for Benton Harbor residents the tax auction is a great way to expand your yard. Many houses in Benton Harbor are on 50 X 100 lots. Most people prefer a larger lot, and the ability to double the size of your yard for $50 is a heck of a deal.
A lot of people worry about the added cost of property taxes, but property taxes for a vacant lot in Benton Harbor City are extremely low. Most lots are assessed at around $500. There are some that are assessed at several thousand dollars because there used to be a house on them. Getting these assessments dropped is extremely easy to do in this situation. On a $500 assessment a homeowner who files a principal residence exemption would be paying $22 per year in taxes. For someone who owns a lot as an investment property that is not adjacent to their primary residence the taxes would be $31 per year.
Berrien County Land Bank:
The Berrien County Land Bank essentially serves as a stop over point for neglected property on its way to becoming useful again. They run the side lot purchase program in Benton Harbor as a primary tool in this mission. From their website:
“The Berrien County Land Bank Authority will serve as a tool for strategic economic development in our community through its ability to acquire, demolish, rehab, dispose of and hold on to tax-reverted properties and return them to productive use in a rapid manner. It will work with other organizations, agencies and developers in the community who have plans in place for area neighborhoods to ensure a coordinated revitalization plan. The mission of the Berrien County Land Bank is to alleviate blight and increase the tax base through thoughtful acquisition and disposition of tax reverted and abandoned properties, ensuring that land is developed with high standards in the most productive manner.”
Room For Improvements:
The Berrien County Land Bank runs the side lot program, which currently has 100 parcels in it. I am actually quite surprised that the land bank is still in possession of 100 parcels, which is around the same amount of parcels they had 1 year ago. For the most part each of these parcels has at least 1, and sometimes up to 3 other properties that border it, but they aren’t selling extremely fast to adjacent homeowners. I noticed while using the GIS mapping system that several of these lots adjoin other vacant lots and houses that are in this years tax auction. In this years tax auction there are also several vacant lots that adjoin houses, but the only way to know this is to look it up on the GIS system.
In one unique example, It would be possible for a buyer to get a house on a typical city lot, and then buy an adjoining 9 lots. In the picture to the left the yellow represents tax auction lots and the purple represents land bank owned lots. Note that the double lot in the lower left corner that is not highlighted is owned by the city. The only house in all of these lots is on the second yellow highlighted lot from the top. The buyer could get this lot and the other 4 yellow lots at the tax auction, then petition the land bank for the two purple lots. Since Benton Harbor City owns the double lot and has no use for it (the city owns over a hundred vacant lots), they would most likely be happy to sell it. In addition to the price of the house which is on a 50X100 lot, the buyer could potentially pick up an additional 9 50 X 100 lots for probably under $1,000, creating a city property with over an acre lot.
This was certainly an extreme example, but for the most part there are dozens, if not potentially hundreds of cases where an existing occupied home could have its yard doubled through either tax auction property, land bank property, or City of Benton Harbor property.
I think that the county could increase adoption of these lots by:
A: Running a campaign for the side lot purchase program: I didn’t know until last year that this program existed, despite living in Benton Harbor for 7 years. At a minimum I think it would make sense to transition this program from a passive program to an active program. I think targeted mailings to all homeowners who share adjoining property with a land bank lot could increase adoption of these lots quickly.
B: Combining any vacant adjoining lots that are either in the tax auction or in the land bank to any structures that are not scheduled for demo in the tax auction. This would ensure that the lots would sell. Typically 100% of houses not scheduled for demo sell. If the parcels were already bundled in with the houses, then fewer parcels would end up in the land bank.
C: At the very least, include a blurb on each house that is being auctioned that states * Adjacent to lot 11-52-XXXX-XXX-XX-X. This would let bidders know that a bordering parcel is also in the auction, or is available through the land bank.
Options B and C will not reduce all of of the properties in the land bank, but I wouldn’t be surprised if over time they reduced the number of properties in the land bank by 25% – 50%. The Berrien County Land Bank, City of Benton Harbor, and The Berrien County Treasurer have done an amazing amount of work to stabilize the Benton Harbor housing market, but there is still a lot more work to do.
Have you ever participated in a tax auction? What is your county’s tax auction process like?