Counties can ban owners from foreclosure resales
But Wayne officials say they don't want to prohibit practice
Christine MacDonald/ The Detroit News
Detroit — State officials and area county treasurers say Wayne County already has the authority to stop a growing number of property owners from ditching tax debt by buying their land back for pennies on the dollar at the annual foreclosure auction.
But Wayne County officials said they don't want to ban the practice, arguing it would be too hard to enforce and could hurt poor homeowners.
"We have no plan to do that at this point," said Wayne County Chief Deputy Treasurer David Szymanski. "The enforcement mechanism for not allowing people to buy back is a nightmare."
"We are trying the do the best we can in trying economic times."
The Detroit News reported last week that Detroit property owners are using the little-known loophole to erase tax debt, interest, fees and unpaid water bills by letting properties go into foreclosure and then buying them back at the Wayne County treasurer's auction, sometimes for as low as $500.
The News identified about 200 of nearly 3,700 Detroit properties sold at auction last year that appeared to be bought back by owners, wiping away about $1.8 million in tax debt.
That included one Detroit landlord who lost seven rentals after he didn't pay $131,800. He bought them back a month later for $4,051.
At the September auction, the properties' prices are the debt that's owed. But in October, the county treasurer sells off whatever is left at a $500 opening bid.
While Wayne County doesn't want to stop the method, Macomb County Treasurer Ted Wahby said he plans to officially ban the practice this fall. His office is drafting a registration form that would make the buyer pledge that they are not buying back their property and if found lying, the sale would be voided.
"As the economic situation is getting worse, it opens the doors to these guys," Wahby said. "If they are allowed to get away with that, you'll see this hole it will create for the county."
Wahby said he hasn't seen anyone try it yet, but he is worried about the potential and wasn't sure he could prevent it. This spring he asked state Sens. Steven Bieda and Jack Brandenburg to push legislation to ban it. But after the bill's introduction, state Treasurer Andy Dillon's office said county treasurers already had that power.
Oakland County Treasurer Andy Meisner said his office also hasn't seen anyone try it, but if someone did, he would likely put the buyer on the county's "black list" of banned buyers, which include those who may owe back taxes on other properties.
"We have always kept an eye on folks trying to buy back their property," Meisner said. "We consider it an act of extreme bad faith. It's cheating."
But most of those buying back properties in Detroit are homeowners who are overwhelmed by tax debt and Szymanski said keeping them in their homes is the best option. Buyers could always secretly form a new company and still buy, he said.
The state of Michigan, which operates auctions for 12 counties, doesn't ban owners from buying back properties because it's too hard to administer, said spokesman Terry Stanton.
Szymanski said his office plans to roll out auction reforms this week that focus on making sure auction buyers maintain their properties and that they pay the taxes on the properties they purchase.
"We are working on solutions to many of these problems," Szymanski said.
The News found dozens of examples of properties bought back by landlords and speculators.
Seven of Jeffrey Cusimano's rental properties went into foreclosure last September after he didn't pay more than $131,800 in taxes and other debts. The Clinton Township landlord bought them back at auction for $4,051. And well-known land speculator Michael Kelly bought back three properties last fall through a company he is affiliated with to erase a $37,595 debt.
Cusimano blamed Detroit, saying the taxes on his properties weren't realistically assessed and he had to buy them back for his business to survive. Detroit's tax rates — 65 mills for homeowners and 83 mills on other property owners — are the highest in the state, according to the Citizens Research Council of Michigan.
Counties could be forced to ban owners who owe back taxes from the auction under a bill introduced by Sen. Tupac Hunter, D-Detroit, that is pending.
From The Detroit News: http://detnews.com/article/20110913/METRO01/109130352/Counties-can-ban-owners-from-foreclosure-resales#ixzz1XsWlIg2nLisa Ekanger Your Hometown Realtor!