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Monday, June 18, 2007

D. C Tax Auctions, How Real?

The clock is ticking for more than 3,000 D.C. property owners to remit back real estate taxes or face losing their land, as the District moves to collect millions of dollars through its annual tax auction.

Roughly $11 million in tax liens, all tied to unpaid 2006 property tax bills, will be up for bid during the legally required five-day sale, which kicks off July 9. Once the liens change hands through auction, the properties’ owners have a matter of months to pay back taxes, fees and interest before the auction winner can go to court to start foreclosure proceedings.

“We do not sell the property,” said Martin Skolnik, director of the Real Property Tax Administration. “We’re selling the right to redeem the property at some point in the future.”

The event is popular among bankers, savvy investors and get-rich-quick schemers who hope to buy a house on the cheap, renovate it and turn it around for a big profit. Despite the promises of late-night infomercials, that last plan rarely works out.

In the vast majority of cases the property owner pays the lien long before the deed is lost via a court-ordered foreclosure. The auction winner is then repaid for the lien — minus the District’s $150 tax sale fee — plus interest. If the bidder paid extra for the lien, say $2,000 for a $500 bill, they’re repaid for the surplus as well, but without interest.

During the District’s 2006 sale, 1,997 liens were sold to hungry bidders for a total of $28.7 million, of which $23 million was surplus.

“By bringing these properties back onto the active tax rolls, we provide a sounder financial base for the District,” said Sherryl Hobbs Newman, deputy chief financial officer for tax and revenue.

Skolnik’s advice to prospective bidders? Do your research. The last thing you want is to buy a property in Georgetown for $2,000 only to find later the lot is pie-shaped or has no road access.

“We make it very clear,” he said, “buyer beware.”

Mandatory registration for the auction begins July 5. To register, bidders must make a deposit of at least 20 percent of their total bid.

***THE EXAMINER

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