Ingham County Auction Study - Michigan Association of County

Ingham County Treasurer’s
Real Estate Auction:
Research on Buyer Patterns
and Alternate Models
for Auction Management
Nathalie Winans
August 8, 2016
Study Context and Motivation
 Ingham County Treasurer has been very
interested in finding and testing innovations to
improve the management of the tax-foreclosure
and auction processes
 Goals of innovations:
 Reduce Ingham County’s overall tax-foreclosure rate
and recidivism
 Improve neighborhood quality, stability, and market
value
2
Public Policy Associates, Inc.
Earlier Research on Ingham
County Tax-Foreclosure Auction
 Economic Impact Study (Graebert
et al., 2015):
 Renovations by new owners of auctioned
properties have a positive impact on
property value in surrounding
neighborhoods
 For each $1 spent on auctioned
properties, $1.28 added to regional
economy + 21 direct & indirect jobs
created
 Less than 10% of auctioned properties
reverted to tax foreclosure per year since
2010
3
Public Policy Associates, Inc.
Goals of This Study
 Understand best practices in tax-foreclosure
prevention and auction management
 Document current innovations in auction-sale
management by Ingham County Treasurer and
compare them with practices in use by other
selected county treasurers in Michigan
 Understand characteristics of recent customers
of the Ingham County Tax Foreclosure Auction
4
Public Policy Associates, Inc.
Research Tasks:
Literature Review
Literature on financialliteracy interventions to
prevent tax foreclosure
Literature on alternate
models that other county
treasurers are using for
auction-sale management and
property disposition
5
Public Policy Associates, Inc.
Research Tasks:
Interviews and Customer Survey
Key-stakeholder interviews:
Ingham County Treasurer and Chief Deputy
Treasurer
Treasurer and deputy treasurer from two additional
Michigan counties
Customer survey:
Telephone survey of 102 individuals who had
purchased properties at Ingham County Tax
Foreclosure Auction between 2012 and 2015
6
Public Policy Associates, Inc.
Overall Research Findings
at a Glance
Little existing research on best practices (or
impacts of same) for auction management,
foreclosure prevention
Ingham County is making several innovations in
foreclosure auctions and foreclosure prevention
Most Ingham tax auction buyers are Ingham County
residents who invest in their properties, want more
pre-sale information to guide their purchases
7
Public Policy Associates, Inc.
Key Finding #1:
Little Existing Research on Tax-Foreclosure Prevention
and Foreclosure Auction Management
 Foreclosure Prevention Research: Financialliteracy counseling and other interventions
may be effective, but more research is needed
 Examples of interventions:
 Financial literacy and asset-building programs (e.g.,
“just in time” counseling related to specific financial
challenges)
 Multifaceted foreclosure-prevention services
 Tax relief for homeowners
8
Public Policy Associates, Inc.
Key Finding #1, Cont’d:
Little Existing Research on Tax-Foreclosure Prevention
and Foreclosure Auction Management
 Tax-Foreclosure Auction Management
Research: Many strategies exist, but few have
been tested for their effects
 Examples of strategies:
 Modify tax foreclosure auctions
 Gather and use accurate foreclosure data
 Understand characteristics, categories of distressedproperty buyers (e.g., resident buyers, business owners,
nonprofits, investors/speculators)
 Educate the public on how the auctions work
9
Public Policy Associates, Inc.
Key Finding #2:
Ingham County’s Auction Practices Are Innovative;
More Research Needed to Assess Impact
 Ingham County has piloted several practices to
remove uncertainty from the auction process,
educate buyers, discourage disinvestment, and
improve auction outcomes
 More research is needed to determine whether
these practices are unique to the county and
understand their impacts on auction results and
surrounding neighborhoods
10
Public Policy Associates, Inc.
Key Finding #2, Cont’d:
Examples of Ingham County’s Auction Practices
 Internal management of forfeiture, and direct
communications with property owners
 Outsourcing auction sales
 Advertising and promotion of auctions
 Restrictive covenants on auctioned properties
 Adjusting auction dates
 Recovering the full cost of the property sale
11
Public Policy Associates, Inc.
Key Finding #2, Cont’d:
Examples of Ingham County’s Auction Practices
 Periodic use of counter sales in lieu of a third
auction
 Relative flexibility in payment terms
 Offering classes to educate potential buyers
 Use of reverter clauses to return auctioned
properties to county ownership if they are
forfeited
12
Public Policy Associates, Inc.
Key Finding #3:
Ingham County Uses Several Tactics to Educate
Homeowners at Risk of Foreclosure
 Television advertising
 Community meetings
 Payment plans and
financial counseling
Postcard advertising Ingham County Treasurer’s
“Neighbors Guiding Neighborhoods” events for
June 2016. Photo by Public Policy Associates, Inc.
13
Public Policy Associates, Inc.
Key Finding #4:
Most Ingham County Auction Buyers are Satisfied
with the Auction Process (n=98)
54%
2016 Survey of Ingham County Tax
Foreclosure Auction Buyers
Gathered buyer feedback on:
•
•
•
•
•
Satisfaction with auction process
Goals and uses for purchased property
Factors driving purchase decision
Money invested in purchased property
Suggested auction-process improvements
•
Individuals who had made at least one
purchase at the Ingham County Tax
Foreclosure Auction between 2012 and 2015
34%
Targeted respondents:
Individual auction buyers surveyed:
•
•
102
Represents 36% of the total number of auction
buyers from 2012–2015
14
5%
5%
Very
Somewhat
dissatisfied dissatisfied
Somewhat
satisfied
Very
satisfied
Public Policy Associates, Inc.
Key Finding #5:
Most of the Auction Buyers Surveyed
Have a Stake in Ingham County
How far away from this property do you live? (n=101)
39%
6%
I live in it
33%
11%
8%
Same street
4%
Same city Same county Same state I live outside
Michigan
15
Public Policy Associates, Inc.
Key Finding #6:
Cost and Potential Return on Investment Were the
Primary Factors in Purchase Decision
57%
What factors drove your decision to purchase the property?
Select all that apply. (n=102)
52%
28%
Cost
27%
Potential return Condition of
Condition of
on investment the surrounding the property
neighborhood
16
22%
33%
Access to
Other (please
parks, public
specify)
transportation,
or other
amenities
Public Policy Associates, Inc.
Key Finding #7:
Most Auction Buyers Invest
in Improving Properties After Purchase
81%
Have you made any improvements
to the property, or do you intend to? (n=102)
10%
8%
Yes
Not yet, but I intend to No, and I don't intend
to
17
1%
Not sure
Public Policy Associates, Inc.
Key Finding #7, Cont’d:
Specific Property Improvements Described
Can you describe the most significant improvements you have
made to the property? (n=82)
Repair/remodel interior structure
(i.e., bathrooms, kitchen, floors, drywall)
Cleaning and appearance
(i.e., new carpets, painting, landscaping)
Repair/replace exterior structure
(i.e., roof, gutters, siding, windows)
New furnace, water heater,
or other major appliance
28%
New plumbing and/or electric
Demolition of blighted structures
New building or addition
to existing structure
2%
7%
18
35%
40%
48%
24%
Public Policy Associates, Inc.
Key Finding #7, Cont’d:
Many Spent Over $10,000 on Improvements
45%
After the initial purchase price,
about how much cash have you invested
in this property? (n=77)
25%
16%
12%
3%
More than
$10,000
$5,000-$10,000
$1,000-$5000
19
Less than $1,000
Not sure
Public Policy Associates, Inc.
Key Finding #7, Cont’d:
Significant Before/After Difference from Improvements
How Did The Condition of the Property Compare
with Other Properties on the Same Block? (n=81)
At Time of
Purchase
After
improvements
were made
Not Sure
12%
9% 4%
58%
21%
9%
58%
30%
A little worse or much worse
About the same
20
A little better or much better
Public Policy Associates, Inc.
Key Finding #8:
Buyers Want More Details on Properties Up For Auction
47%
If you were to do this again, what would help you
decide whether to purchase or improve other properties
like this? (n=100)
32%
30%
19%
Information
Doing more
about the
research myself
condition of the
property
Information
about
regulations
affecting the
property
Information
about the
surrounding
neighborhood
21
24%
15%
Better
understanding
of the level of
effort needed
prior to
occupancy
Other (please
specify)
Public Policy Associates, Inc.
Conclusions
There is room for innovation in tax-foreclosure
auction management and foreclosure
prevention—and for more research to document it
Ingham County auction buyers are county
residents who invest in their properties after
purchase and need more pre-sale information
about the properties to help them obtain a fair
price and good value
22
Public Policy Associates, Inc.
Recommendations
Document the results of current innovations
Continue to seek buyer feedback
Continue to adjust auction practices as
appropriate
Gain a deeper understanding of other
treasurers’ auction practices
Consider increasing efforts to educate at-risk
owners
23
Public Policy Associates, Inc.
For questions about this study,
please contact:
Eric Schertzing
Ingham County Treasurer
(517) 676-7233
[email protected]
Nathalie Winans
Project Consultant
(517) 485-4477
[email protected]