Ingham County Buyer Research Final Report

Transcription

Prepared for
Ingham County Treasurer
Ingham County
Treasurer’s
Real Estate
Auction:
Research on Buyer Patterns
and Alternate Models
for Auction Management
Photo: http://mitaxauction.com/open-house-for-upcoming-ingham-county-property-tax-auction/
Prepared by
Public Policy Associates, Incorporated
June 2016
This report was prepared for the Ingham County Treasurer.
For questions about this report, please contact:
Eric Schertzing
(517) 676-7233
[email protected]
Public Policy Associates, Incorporated is a public policy research, development, and evaluation firm
headquartered in Lansing, Michigan. We serve clients in the public, private, and nonprofit sectors at the
national, state, and local levels by conducting research, analysis, and evaluation that supports informed
strategic decision-making.
119 Pere Marquette Drive, Suite 1C, Lansing, MI 48912-1231,
(517) 485-4477, Fax 485-4488, www.publicpolicy.com
Table of Contents
Executive Summary ......................................................................................................................1
Overview ................................................................................................................................... 1
Key Findings and Their Implications .................................................................................... 2
Recommendations.................................................................................................................... 3
Introduction ...................................................................................................................................4
Context....................................................................................................................................... 4
About this Study ...................................................................................................................... 4
Research Questions .............................................................................................................. 5
Methodology......................................................................................................................... 5
Navigating this Report ............................................................................................................ 6
Research Findings .........................................................................................................................7
Key Finding #1: Few Precedents for Innovation in Tax-Foreclosure Prevention and
Auction Management .............................................................................................................. 7
Evidence ................................................................................................................................ 8
Key Finding #2: Ingham County’s Auction Practices Are Innovative; More Research Is
Needed to Assess Impact ...................................................................................................... 15
Evidence .............................................................................................................................. 16
Key Finding #3: Ingham County Uses Several Tactics to Educate Homeowners at Risk
of Foreclosure ......................................................................................................................... 19
Evidence .............................................................................................................................. 19
Key Finding #4: Most Ingham County Auction Buyers Are Satisfied with the Auction
Process ..................................................................................................................................... 20
Evidence .............................................................................................................................. 20
Key Finding #5: Most of the Auction Buyers Surveyed Have a Stake in Ingham
County ..................................................................................................................................... 21
Evidence .............................................................................................................................. 21
Key Finding #6: Cost and Potential Return on Investment Were the Primary Factors in
Decisions to Purchase Property at Auction ........................................................................ 23
Evidence .............................................................................................................................. 23
Key Finding #7: Most Auction Buyers Invest In Improving Properties After Purchase
................................................................................................................................................... 23
Evidence .............................................................................................................................. 24
Key Finding #8: Prospective Buyers Would Like More Access to Details About the
Condition of Properties Up For Auction ............................................................................ 27
Evidence .............................................................................................................................. 27
Conclusions and Recommendations ........................................................................................28
Conclusions ............................................................................................................................. 28
Recommendations.................................................................................................................. 28
Document Results of Current Innovations..................................................................... 28
Continue to Seek Buyer Feedback ................................................................................... 28
Continue to Adjust Auction Practices as Appropriate ................................................. 29
Gain a Deeper Understanding of Other Treasurers’ Auction Practices..................... 29
Consider Increasing Efforts to Educate At-Risk Buyers............................................... 29
Appendices
Auction Buyer Survey Methodology ....................................................................................... A
Additional Data Tables from Telephone Survey ..................................................................... B
Literature Review Sources .......................................................................................................... C
Auction Buyer Survey Instrument ........................................................................................... D
County Treasurer Interview Guides ......................................................................................... E
Executive Summary _________________
Overview
In early 2016, the Ingham County Treasurer’s Office retained Public Policy Associates,
Inc. (PPA) to conduct a variety of research activities to explore issues and opportunities
related to improving outcomes for tax-foreclosed properties that are sold at auction.
The goals of this study were as follows:



Understand best practices in tax-foreclosure prevention and foreclosure auction
management
Document current innovations in auction-sale management by the Ingham County
Treasurer’s Office and compare them with practices in use by other selected county
treasurers in Michigan
Understand the characteristics and needs of recent customers of the Ingham County
Tax Foreclosure Auction
PPA’s research included the following tasks:




A review of available literature on promising financial-literacy interventions to
prevent tax foreclosure
A review of literature on alternate models that other county treasurers are using for
auction-sale management and property disposition
Interviews with the Ingham County Treasurer, Chief Deputy Treasurer, and the
treasurer and deputy treasurer from two additional Michigan counties
A telephone survey of 102 individuals who had purchased properties at the Ingham
County Tax Foreclosure Auction between 2012 and 2015
Research on Buyer Patterns & Alternate Models for Auction Management | Public Policy Associates, Inc.
1
Key Findings and Their Implications
The Literature Is Very Limited, Suggesting Significant Need
to Test and Demonstrate Innovation
The literature review found few sources relating directly to the effects of financial
literacy interventions on tax foreclosure or to alternate models for auction-sale
management and disposition. Within the existing literature, it is possible to identify
several potentially promising practices, but few have been in place long enough to
allow for thorough testing of impacts. The scarcity of well-tested, proven models
within the literature supports the continuing need for innovation on the part of the
Ingham County Treasurer. In order to generate evidence for the field about what
works, it will be important that the results of these innovations be tested to determine
their impacts on tax foreclosure rates and auction outcomes.
The Ingham County Treasurer’s Office Is Implementing
Innovative Tax-Foreclosure Prevention and Auction
Management Practices, Which Create Opportunities to Test
Impacts
The Ingham County Treasurer’s Office is carrying out several innovative practices
designed to improve its tax-foreclosure auction management and to help vulnerable
homeowners in the county avoid tax foreclosure. Other Michigan counties do not
appear to be making wide use of these practices. More information is needed to
ascertain the extent to which these innovations are contributing specifically to auction
outcomes; as such, the county presents an opportunity to add to the body of research on
best practices in tax foreclosure prevention and auction management. In addition, there
is an opportunity to gather more detailed information on auction practices in use by
county treasurers throughout Michigan.
Most Ingham County Auction Buyers Are Ingham County
Residents with a Stake in the Community and a Need for
Good Property Information
Many buyers at the Ingham County Tax Foreclosure Auction are Ingham County
residents who invest significantly in their properties after purchase. They are very
interested in more pre-sale information about the properties to help them obtain a fair
price and good value at the auction. As such, they are likely to benefit from innovations
by the Treasurer’s Office, such as providing increasing numbers of open-house tours
and other details on the properties. As county residents and investors, they can be
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Research on Buyer Patterns & Alternate Models for Auction Management | June 2016
viewed as a valuable asset and partner in a mutually beneficial effort to build
community stability and prosperity in Ingham County.
Recommendations
Document the Results of Current Innovations

The Ingham County Treasurer’s Office should continue to track and document the
long-term outcomes of its current auction sales practices.
Continue to Seek Buyer Feedback

Continue to survey auction buyers—particularly new auction buyers—on a regular
basis (e.g., annually) to understand buyer characteristics, purchasing habits, and
outcomes, and to test the impacts of any additional public information efforts.
Continue to Adjust Auction Practices as Appropriate


Provide more—and more readily accessible—public information about the specific
characteristics of properties to be auctioned.
Seek coverage in the local news media or convene community meetings to
disseminate accurate, easy-to-understand information about how the foreclosure
auctions work and how to participate in them.
Gain a Deeper Understanding of Other Treasurers’ Auction
Practices

Survey county treasurers throughout the state of Michigan on their current taxforeclosure auction practices, innovations, and any impediments that are making
innovation difficult.
Consider Increasing Efforts to Educate At-Risk Owners



Continue working with the Financial Empowerment Center to provide free taxforeclosure counseling to vulnerable households, and track the results over time.
Document the long-term results in Ingham County from the Michigan State Housing
Development Authority’s Step Forward Michigan program.
Continue to hold periodic neighborhood meetings to discuss housing and
foreclosure issues with apartment dwellers, renters, and homeowners in Ingham
County.
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Introduction ________________________
Context
As part of its responsibility for the stewardship of county tax dollars, the Ingham
County Treasurer’s Office is charged with the sale by auction of properties within the
county that have entered tax foreclosure. Beyond this mandate, the Ingham County
Treasurer is interested in finding innovations in the management of the foreclosure and
auction processes. The goals of these innovations are to reduce Ingham County’s
overall tax-foreclosure rate, reduce tax-foreclosure recidivism, and ultimately improve
the quality, stability, and market value of Ingham County neighborhoods. 1
About this Study
In spring 2016, the Ingham County Treasurer’s Office retained Public Policy Associates,
Inc., to carry out the following research activities:



Explore alternate models for tax-foreclosure prevention and auction management in
use outside Ingham County
Discover characteristics and motivations of previous customers of the Ingham
County Property Tax Foreclosure Auction and outcomes of properties they
purchased
Document the current auction practices and innovations of the Ingham County
Treasurer’s office
The primary goal of this research is to uncover insights about how the Ingham County
Treasurer’s Office and other county treasurers can improve their practices to contribute
to better outcomes for property buyers, neighborhoods, and taxpayers. An additional
goal is to identify areas where further research is needed.
Several of the innovations are documented in prior studies of the economic impacts of the
Ingham County Land Bank (Borowy et al., 2013) and the Ingham County Property Tax Foreclosure
Auction (Graebert et al., 2015).
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Research Questions
This project was guided by the following research questions:





To what extent do financial-literacy interventions influence the rates of delinquency,
forfeiture, and foreclosure?
What alternate models are in use by other treasurers in the management of auction
sales? To what extent do others define minimum bids to cover the full
administrative cost of the foreclosure and auction processes?
What alternate models are in use by other treasurers in the disposition of properties?
For example, what are alternate definitions of success in tax-foreclosure sales? Are
diligent efforts made to market auctions to diverse populations? What additional
marketing steps could be taken?
What auction sale scenarios or conditions are most likely to result in improved
properties?
What are key components of the auction approach taken by the Treasurer’s Office
over the past decade?
Methodology
The research methods for this study consisted of:




A review of existing literature on financial-literacy interventions at the delinquency
and forfeiture stages that show promise for averting tax foreclosure.
A review of existing literature on alternate models in the management of taxforeclosure auction sales and disposition of properties.
Interviews with the Ingham County Treasurer and his staff as well as a treasurer
and a deputy treasurers from two additional Michigan counties
A telephone survey of 102 individuals who had purchased properties at the Ingham
County Tax Foreclosure Auction between 2012 and 2015.
Further details on the research methodology are provided in Appendix A.
5
Navigating this Report




Executive Summary: Provides a brief summary of the research, key findings, and
implications.
Introduction: Provides background on the reasons for the study and a description of
the research.
Research Findings: Describes findings from the research and the evidence that
supports them.
Overall Implications/Synthesis: Describes overall conclusions and implications from
the research.
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Research Findings __________________
The overall research findings can be summarized as follows:



There is a dearth of research on best practices for managing tax-foreclosure auctions
and preventing tax foreclosure, and very limited documentation of the impacts of
these practices.
The Ingham County Treasurer’s Office has taken numerous innovative steps to
make its auction process more effective and to help prevent tax foreclosure. Many
of these practices do not appear to be in wide use elsewhere in the state.
Most buyers at the Ingham County Tax Foreclosure Auction are Ingham County
residents who tend to invest significantly in their properties after purchase. They
are very interested in more pre-sale information about the properties to help them
obtain a fair price and good value at the auction.
The detailed research findings are provided below.
Key Finding #1: Few Precedents for Innovation
in Tax-Foreclosure Prevention and Auction
Management
A review of the literature found few sources relating directly to the effects of financial
literacy interventions on tax foreclosure, or to alternate models for auction-sale
management and disposition. Within the existing literature, it is possible to identify
several potentially promising practices, but few have been in place long enough to
allow for thorough testing of impacts. The scarcity of well-tested, proven models
within the literature supports the continuing need for innovation on the part of the
Ingham County Treasurer. In order to generate evidence for the field about what
works, it will be important that the results of these innovations be tested to determine
their impacts on tax-foreclosure rates and auction outcomes.
7
Evidence
Foreclosure Prevention Research: Financial-literacy counseling and other
foreclosure-prevention interventions may be effective, but more research is
needed
Much of the literature on financial-literacy interventions examines their use in
preventing mortgage foreclosure and other forms of financial duress, rather than their
use in preventing tax foreclosure specifically. Several sources suggest that financial
literacy interventions, in general, may be beneficial for this purpose. However,
Graebert et al. (2015), in noting the dearth of literature on tax foreclosure, raised several
caveats2 about comparing mortgage foreclosures with tax foreclosures. Further research
is needed to verify to what extent the recommendations from these studies would be
effective if applied to tax-foreclosure prevention.
Financial-literacy and asset-building programs. Interventions focused on improving
financial literacy are an increasingly popular option for helping individuals improve
their own financial well-being by acquiring the knowledge and skills needed to make
sound financial decisions. Although not related directly to tax or mortgage foreclosure,
several studies show that financial-literacy interventions can have positive outcomes for
low-income populations. For example, Wiedrich et al. (2014) found that low-income
New York City households who were given access to free financial counseling through
the city’s Financial Empowerment Centers had a 5% reduction in percentage of debt
that was past due after 12 months. Those who actually attended counseling showed a
14% decrease during that year. In contrast, a meta-analysis conducted by Fernandes et
al. (2013) of 201 prior studies on the effects of financial-literacy interventions revealed
that the interventions studied explained only about 0.1 percent of variance in
subsequent financial behaviors.
Although the evidence is mixed on the efficacy of financial literacy programs, in
general, the research does point to some particular program characteristics that have
been connected with more positive outcomes, including:
For example, mortgage default tends to occur during recessions, while tax delinquency is more
chronic over time, especially in inner-city neighborhoods from which wealthier households have fled. In
addition, mortgage-foreclosed properties tend to have more value because banks recently lent money
backed by the properties. In contrast, tax-foreclosed properties are more likely to be vacant, abandoned,
and of low value.
2
8


A “just-in-time” approach for targeting coaching and education to address an
individual’s immediate needs at the time of specific financial challenges (i.e., current
risk of foreclosure) or decision points (i.e., prior to purchasing a home) 3
One-on-one counseling that takes into account the complexities of each individual’s
financial situation
For individuals struggling with financial
insecurity, particularly those with very low
incomes, it may be necessary to expand the
focus of financial services beyond literacy to
include strategies for building assets.
Medina et al. (2012) provide a set of assetbuilding strategies that local assistance
providers can use at various stages of
financial insecurity. While some of the
recommended strategies are specific to
addressing homelessness, many could
provide holistic guidelines for wraparound
or comprehensive services to help lowincome households in danger of foreclosure
move toward long-term financial security.
A sample of the recommended assetbuilding strategies is listed in the box at
right.




Recommended AssetBuilding Strategies
Require/offer financial education and
savings programs as part of
emergency assistance.
Ensure availability of appropriate
financial products through Bank On
initiatives.
Maximize income through support of
free tax-preparation services.
Build capacity of case managers to
connect individuals to a range of assetbuilding services.
Jennifer Medina, Jennifer Brooks, and Rick
Haughney, Integrating Financial Empowerment
Strategies into Housing and Homelessness
Prevention Programs,(Washington, D.C.:
Corporation for Enterprise Development, 2012)
Multi-faceted foreclosure-prevention services. Even before the subprime mortgage
crisis and the flood of foreclosures at the heart of the Great Recession, many
government agencies, nonprofit organizations, and private lenders recognized the need
to develop better solutions for helping vulnerable property owners avoid foreclosure.
In recent years, some of the most promising results have been achieved by programs
that employed a combination of services and supports to address the multiple
concurrent challenges often faced by individuals struggling to avoid foreclosure. Table
1, on the next page, provides highlights from recent research on the impact of several of
these foreclosure-prevention initiatives.
Daniel Fernandes, John G. Lynch, Jr., and Richard Netemeyer, "A Meta-Analytic and
Psychometric Investigation of the Effect of Financial Literacy on Downstream Financial Behaviors," in
Advances in Consumer Research Volume 40, eds. Zeynep Gürhan-Canli, Cele Otnes, and Rui (Juliet) Zhu,
(Duluth, MN : Association for Consumer Research, 2012), 1052-1052.
3
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Table 1: Promising Practices in Foreclosure Prevention
Location
Genesee County, MI

State of Ohio



Minneapolis/
St. Paul, MN

Key Elements of Program
Model
Contracted with a foreclosureprevention specialist who worked
individually with homeowners to
postpone foreclosure, adjust their
budgets to allow for property tax
payments, and redeem their
properties.
Giving appropriate notice to
homeowners in danger of
foreclosure (must be delinquent
for one year before foreclosure
can begin).
Providing homeowners with the
right to appeal foreclosure
decisions
Providing statutory mechanisms
permitting the temporary
removal of occupied residential
structures from the foreclosure
process
Mortgage Foreclosure Prevention
Program provided the following
services to borrowers in danger of
foreclosure:

Intensive case management

Assistance loans

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Post-purchase financialliteracy counseling
Evidence of Success
In an analysis of pre- and post-auction
ownership status for a random sample
of properties foreclosed in Detroit in
2002–2003 and Flint in 2002–2004,
Dewar (2009) identified Genesee
County’s strong foreclosureprevention program as a key factor in
the county’s lower rate of tax
foreclosure vis-à-vis Wayne County,
which lacked such a program.
Weber (2013) suggested that Ohio
provided a promising approach to
foreclosure prevention that other states
might follow via legislation of
foreclosure-prevention methods
described at left, together with the
formation of County Land
Reutilization Corporations (i.e., land
banks). However, the paper did not
provide evidence of the model’s
results over time.
In a study of over 4,200 borrowers who
received assistance from the program,
Quercia et al. (2005) found that the rate
at which borrowers fell back into
delinquency was lower for program
participants (about 33% after 36
months) than for other previously
delinquent borrowers in the area
(about 45% over the same period).
Likewise, a paper from the National League
of Cities and Corporation for Enterprise
Development (2012) provides a detailed
series of strategies for building financial
security, with examples from American cities,
including a chapter on foreclosure mitigation.
For highlights from this chapter, see the text
box at right.
Additional ForeclosureMitigation Successes
Phoenix: Created a public awareness campaign
to tell at-risk homeowners about housing
counseling and other services
Philadelphia: Court intervention program
provided free legal assistance and housing
counseling; required court-mandated
mediation before a foreclosure could be
completed
Tax-relief solutions for homeowners. In
Milwaukee: Created a permanent
2015, the Center for Community Progress
Homeownership Consortium to educate
issued a policy brief that proposed an array
homeowners and buyers; website with
of solutions for tax-foreclosure prevention by
information and resources for those affected by
foreclosure and considering purchase of
maximizing awareness of available tax relief
foreclosed homes
and enacting policy changes to make tax
relief more widely available. Although the
brief was written in reference to Detroit, the authors noted that these solutions could be
applied to many other cities. The recommendations include the following:





Raise awareness of existing tax-relief options through a “one-stop-shop” website, direct
outreach to residents, providing prospective homebuyers with information on
available tax incentives, and hosting "tax relief fairs" for homeowners
Make it easy for residents to determine eligibility for tax relief by creating a tax-reliefeligibility questionnaire, interactive maps, and a web-based property search
application
Reduce the amount of time it takes for residents to apply for and receive notice of tax relief by
conducting a process efficiency analysis to identify potential improvements, and by
automating tax-relief status notifications
Dedicate staff capacity and use data to identify possible tax-exemption fraud cases,
cross-reference property databases to identify properties with exemptions for which
they are ineligible, and integrate Tax Assessor data with data from other
departments
Consider state-level changes to make tax-relief programs more available and relevant by
allowing poverty hardship exemptions for prior years, expanding the tax-relief
appeals period, widening income eligibility for tax-relief, aligning Neighborhood
Enterprise Zone (NEZ) boundaries with other revitalization efforts, and expanding
the geography and timeline for NEZ eligibility
11
Tax-Foreclosure Auction Management Research: Many strategies exist, but few
have been tested
Several sources document the failure of auctions alone to serve as an adequate solution
for returning tax-foreclosed properties to productive use (Dewar 2006, 2009; Coenen et
al. 2011; Hackworth et al. 2014; Dewar et al. 2015). Relatively few sources propose
concrete solutions for improving tax-auction outcomes, and still fewer document the
results of these solutions.
Modifying the tax-foreclosure auction process. Studies conducted by Dewar in 2009
and 2015 suggested that jurisdictions should avoid tax auctions whenever possible.
They cited poor auction outcomes in Detroit and Flint and their tendency to favor
speculation, leave properties in unproductive use, and/or quickly return them to
foreclosure. In addition to recommending enhanced foreclosure-prevention programs,
such as those discussed in the previous section of this report, these studies
recommended that as many properties as possible be disposed of through managed
sales (e.g., land banking), citing the superior results from this approach in Detroit and
Flint. Borowy et al. (2013) and Graebert et al. (2015) found similar results in their study
of land banking in Ingham County. Alexander (2005) reached the same conclusion for
land banks in several states including Michigan. Clearly land banking is an effective
solution that should be used wherever feasible.
However, given the large numbers of properties in tax foreclosure, land banking is not
feasible for all properties. In recognition of this reality, Dewar (2009) recommended
modifying the tax auction process to increase the likelihood of selling foreclosed singlefamily residential parcels to buyers who are more likely to restore the property to
productive use and avoid a return to foreclosure (i.e., owner occupants, adjacent
property owners, and community-minded nonprofits). Specifically, she recommended
changing auction rules so that prospective buyers have more time prior to an auction to
assess property condition and following an auction to pay for auction sales.
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In a review of the Wayne County
Treasurer's process for the auction sale of
tax-reverted property, Coenen et al. (2011)
made two key recommendations for
making tax-auction sales more conducive
to neighborhood stability:


Modify the auction process to increase
short-term revenues by (a) shifting to an
online auction platform; (b) providing
online property information, tutorials,
and details on title clearing and water
liens; and (c) reducing numbers of
properties sold at one time by
grouping auctions based on specific
property criteria
Encourage positive post-sale reuse of
properties through (a) strategic use of
right of refusal, whereby strategically
important properties are purchased
and sold through the land bank to
buyers who have interest in positive
reuse; and (b) discouraging negative
reuse by requiring prepayment of
taxes or putting deed restrictions on
the property
Coenen et al. also recommended several
changes to Michigan law to improve the
tax-auction process. These are quoted in
the text box at right.
Suggested Statutory
Revisions to the Foreclosure
Process
From Coenen et al. (2011), p. XIV:
Changes in the foreclosure-notification process:
Allowing online notices could save [money] and
simplify property searches.
Changes to interest on delinquent property taxes:
Allowing county treasurers discretion in setting
interest rates can ease the financial burden on
low-income homeowners, increasing the
likelihood of complete tax payment.
Changes to the existing auction process: Allowing
omission of the second auction could eliminate
opportunities to purchase properties below
taxes owed. Alternatively, allowing variable
minimum bids in the second auction can ensure
that prices paid for property more closely reflect
the market value of the property.
Changes to restrict neglectful property owners:
Prohibiting bidders from purchasing property
or from transferring property ownership while
they owe delinquent taxes can discourage
property neglect and help the Treasurer’s Office
recoup delinquent taxes.
Changes in the right of refusal process: Allowing
the state, county, or city to purchase property
for the second auction’s opening bid prior to the
second auction can encourage local
governments to purchase property to meet their
planning goals. This can also give bidders less
incentive to wait for the second auction to
purchase property.
Gathering and using accurate foreclosure data. Kingsley et al. (2009) studied
foreclosure interventions in Atlanta, Chicago, and Washington, D.C. during the post2007 financial crisis. In each of the three cities, the National Neighborhood Indicators
Partnership (NNIP) gathered data, conducted initial analyses, developed relationships
with local stakeholders, and created strategies for data-driven policy interventions.
During the next six months, NNIP worked with local stakeholders to implement the
strategies. The study’s authors recognized that definitive change would take longer
13
than one year but hypothesized that enough change would occur in the first year to test
their hypothesis. This in fact occurred, validating the usefulness of neighborhood-level
data for foreclosure prevention and neighborhood stabilization, as long as two key
factors are present:


Availability of foreclosure data
Institutional capacity to clean and organize the data, translate them into
understandable and relevant formats, and use them to inform foreclosure
prevention and neighborhood stabilization work
Understanding distressed-property buyers. While it is desirable to limit total numbers
of tax auctions and to increase the proportion of auction buyers who are not
speculators, some speculative purchasing is inevitable. Therefore, in order to know
how best to promote responsible investor behavior, it may be useful to understand the
characteristics and motivations of those who purchase distressed properties. To this
end, Coenen et al. (2011) provided a buyer typology:




Resident buyers (owner-occupants) who purchase side lots, buy to occupy, or
repurchase their own home in a second auction to zero out their tax bill
Business owners buying nearby lots for parking
Nonprofits buying lots to develop or rehabilitate housing
Investors or speculators purchasing for rental or sale
Most distressed-property auction buyers fit in the category of investors or speculators
(Mallach, 2006, rev. 2010; Dewar, 2009; Coenen et al., 2011; Immergluck, 2012; Dewar et
al., 2015). As such, this category merits further examination. Mallach (2006, rev. 2010)
further divides distressed-property investors into the following four categories:

Rehabbers: Repair properties for resale

Milkers: Buy and rent properties out with minimal maintenance


Flippers: Flip properties quickly in the same condition under which they were
purchased
Holders: Buy and rent properties in fair to good condition
Mallach recommends using a combination of regulatory and incentive strategies (the
latter being especially important in a weak real estate market) for promoting
responsible investor behavior.
14
Educating the public. One simple solution
for bringing more responsible buyers to the
tax auctions is to increase public awareness
of how the auctions work. In an interview
with Mlive.com (2013), Jackson County
Treasurer Karen Coffman provided a series
of common-sense tips on how to navigate
the Jackson County Treasurer's tax
foreclosure auction without getting burned
in the process. This advice is shown in the
text box at right.
Tips for Bidding at
Jackson County’s TaxForeclosure Auction
-From Mlive.com, August 16, 2013






Check the city of Jackson’s demolition
list to see if the property is headed for a
demolition
Buyers are required to pay back-taxes
on the parcel
There are no refunds
Buyers are bidding on a deed, not a
house
Seek the help of land surveyors,
property inspection companies and the
respective assessor’s office.
The parcels listed on the website can
change daily.
Key Finding #2: Ingham County’s Auction
Practices Are Innovative; More Research Is
Needed to Assess Impact
The Ingham County Treasurer’s Office has implemented several practices intended to
remove uncertainty from the tax-foreclosure auction process, educate buyers,
discourage disinvestment, and improve auction outcomes, such as positive impacts on
the properties sold and the neighborhoods where the properties are located. While
available data suggests that these practices are innovative, further research is needed to
determine whether these practices are unique to Ingham County, to what extent the
positive economic impact of the county’s auctions (Graebert et al., 2015) can be
attributed to them, and whether the benefits outweigh any added costs. In addition,
further study would be needed to test the effectiveness of these tactics in counties with
population densities, economies, or other characteristics that differ from those of
Ingham County.
15
Evidence
Innovations by the Ingham County Treasurer’s Office include the following:





Internal management of forfeiture, and direct communications with property owners. Most
Michigan counties outsource these tasks, but Ingham County carries them out
internally. According to Ingham County officials, the advantage of this practice is
that the County Treasurer and staff interact directly with individual property
owners and have intimate knowledge of conditions affecting both the properties and
the neighborhoods where they are located.
Outsourcing auction sales. Although the above tasks are managed internally, Ingham
County outsources auction sales. The purpose for this is to allow the treasurer more
time to focus on individual properties and bidders, thus providing for another direct
link to neighborhoods and the ability to work strategically to improve those
neighborhoods.
Advertising and promotion of auctions. Ingham County has used several tactics to
promote its property auctions, including newspaper advertisements, an e-mail list,
direct mailings, and yard signs. For the most desirable properties, the county also
hosts open houses, and credits them, in particular, with contributing to successful
auction sales.
Use of non-rental, historic preservation, or demolition covenants. For selected properties,
Ingham County applies restrictive covenants before the auction sale to ensure that
the properties remain owner-occupied and/or are not converted to rentals. As an
incentive to make non-rental covenants more attractive, the county provides a
warranty deed that helps eliminate uncertainty about the property’s condition. A
few properties also have been sold with restrictive covenants designed to ensure
that the historical characteristics of their exteriors are preserved by future owners.
The intention of these covenants, which are disclosed prior to the auction sale, is to
provide for a balance of owner-occupied properties vis-à-vis rentals in the relatively
weak housing market of Lansing, and to steer historic properties toward auction
buyers who are interested and engaged in historic preservation. Finally, the county
occasionally applies covenants requiring the demolition of unsafe structures on
auctioned properties, as areas of Ingham County that lie outside Lansing are
ineligible for federal blight removal funds.
Adjusting auction dates. To give auction customers more time to stabilize their
properties before the onset of winter, Ingham County schedules the second property
auction (for the sale of properties not sold at the first property auction in July) to
take place by the end of August.
16



Recovering the full cost of the property sale. At the second auction, Ingham County
bases its starting prices on the amount of money needed to recover all costs incurred
in bringing the property to market—e.g., advertising, cleanup, tree removal,
boarding up windows, attorney costs, boundary surveys, or environmental-hazard
assessments. According to the County Treasurer, these costs can add up to roughly
$4,000–$5,000 for a single property. Although this results in a higher bidding price,
it could potentially steer properties toward buyers of higher economic means. As
the County Treasurer puts it, “If someone won’t pay $4,000 or $5,000 for a house, we
don’t want them buying it.” The reasoning is that while higher prices also may
result in fewer overall sales, the sales that do occur are higher quality because of the
effort expended in property improvement and promotion. Properties still unsold
after the second auction are slated for teardown, passed on to the Ingham County
Land Bank, sold at a third auction, or sold in counter sales. The latter two
approaches are discussed below.
Periodic use of counter sales in lieu of a third auction. On some occasions, Ingham
County holds a third auction to sell properties that do not sell at the first or second
auctions. However, Ingham County does not conduct a third auction every year.
Instead, the county sometimes uses counter sales to dispose of excess properties that
are not sold at auction or passed on to the land bank. In a counter sale (also known
as an over-the-counter sale), the county sells properties to buyers directly, “over the
counter,” at the price of the minimum bid offered at the second auction. The
counter sale occurs after the local unit of government has declined to accept the
property. The current year’s taxes are also eliminated if the property is not sold at
the second auction. The county’s purpose for alternating third auctions with
counter sales is to reduce the risk of auction buyers colluding to withhold bids on
valuable properties at the first or second auctions so that they may be purchased at a
third auction at a much lower price.
Relative flexibility in payment terms. Rather than requiring full payment on the day of
the auction, Ingham County offers some flexibility in the timing of payment,
especially with higher-priced properties. The county typically requires that
payment be completed within two weeks to 30 days of the auction date. Although
this is still not enough time to obtain a mortgage or other loan, it opens more
potential bidders to the auction, which offers the potential of increasing the final
auction price and raising the likelihood that the buyer will treat the property as an
important investment to maintain and protect.
17


Offering classes to educate potential buyers. Each April
“An educated buyer
during Money Smart Week, the Ingham County
Treasurer’s Office offers classes to educate potential
is a better buyer.”
buyers about the workings of the foreclosure auctions.
- Eric Schertzing,
The treasurer also offers an information session for
first-time buyers in late June or early July, shortly
before the first auction. The reasoning for these classes is that well-educated buyers
will enter the auction process with a realistic idea of the costs and other obligations
involved, increasing the likelihood that they will be good stewards of the properties
they purchase. In addition, it could increase the proportion of auction buyers who
are Ingham County residents with a stake in the prosperity of their community.
Use of reverter clauses. Ingham County recently began using a reverter clause, which
returns auctioned properties to county ownership if they are forfeited. During the
first three years of its use, the clause was applicable only to the auction purchaser,
meaning it could not be enforced if the purchaser resold the property. In 2016,
however, the county changed the terms of the clause so that it was enforceable on
any owner within five years of the auction sale. Under this procedure, when an
auctioned property enters forfeiture, the owner receives a $95 fee and a notice that
the county will file a lawsuit against them if payment is not made within 30 days.
When a lawsuit is filed, a $600 penalty is charged and a lis pendens (a notice of
pending legal action that attaches to the property, making resale difficult 4) is issued.
Most of the auction practices discussed above are not used in the two other Michigan
counties whose treasurer’s offices were interviewed for this study. Generally speaking,
those counties:




Outsource their title searches, forfeiture proceedings, auctions, mailings, and
customer telephone calls to an outside firm.
Require payment on the same day or within a few days of the auction.
Do not apply restrictive covenants, reverter clauses, or counter sales.
Conduct open houses for few or no properties each year.
Frank O. Brown, Jr. “The lis pendens: A powerful legal tool.” Atlanta Building News.
Retrieved June 6, 2016, from http://www.naylornetwork.com/gahnwl/articles/abn.asp?aid=51062&projid=3104.
4
18

Use relatively little advertising to promote the auctions, beyond legally mandated
newspaper ads. For example, they do not use yard signs, billboards, social media,
and word of mouth.
If the same is true for other Michigan counties, then the Ingham County Treasurer’s
auction practices could be considered innovations with potential for replication
elsewhere. However, additional research involving a larger sampling of Michigan
counties is needed to determine whether this is the case.
Key Finding #3: Ingham County Uses Several
Tactics to Educate Homeowners at Risk of
Foreclosure
In keeping with the recommendations uncovered in the literature review, the Ingham
County Treasurer’s Office already makes use of several tactics to help at-risk
homeowners steer clear of potential foreclosure.
Evidence
Ingham County’s foreclosure-prevention tactics include the following:


Television advertising. Ingham County purchases television advertisements each
January and, more recently, in May to get the attention of tax-delinquent
homeowners as foreclosure
approaches. Some of these television
spots are filmed with treasurers from
other counties to provide for
maximum coverage and impact.
Although it is difficult to estimate
how many foreclosures are
prevented by the ads, county
officials experience a spike of phone
calls from concerned homeowners
each time an ad airs.
Community meetings. Starting in
2014, the Ingham County Treasurer
hosted a series of community
conversations called “Neighbors
Postcard advertising Ingham County Treasurer’s “Neighbors
Guiding Neighborhoods” events for June 2016. Photo by Public
Policy Associates, Inc.
19

Guiding Neighborhoods” to directly educate local homeowners on how to prevent
foreclosure and gather their input on what they would like to see happen to
foreclosed properties in their neighborhoods. During the first meeting, roughly 100
residents were present.
Payment plans and financial counseling. Starting in 2016, Ingham County implemented
a carrot-and-stick approach to payment plans in that homeowners in forfeiture can
go on an extended payment plan, provided that they participate in financial
counseling by the Financial Empowerment Center at Capital Area Community
Services, which has contracted with the county for this purpose.
As is the case with its auction-sales tactics, Ingham County uses several approaches
recommended in the literature on foreclosure prevention. However, there is little direct
evidence on how effective these approaches are in preventing foreclosure. As such, this
is another opportunity for Ingham County to test and demonstrate impact through
further research.
Key Finding #4: Most Ingham County Auction
Buyers Are Satisfied with the Auction Process
Overall, buyers who purchased properties
at the Ingham County Tax Foreclosure
Auction expressed satisfaction with the
auction process.
Evidence
2016 Survey of Ingham County Tax
Foreclosure Auction Buyers
 Objective: Gather buyer feedback on:

Satisfaction with auction process

Factors driving purchase decision

Goals and uses for purchased property
Nearly all respondents to PPA’s survey of
 Money invested in purchased property
auction buyers, who purchased properties
 Suggested auction-process
between 2012 and 2015, were “somewhat
improvements
satisfied” or “very satisfied” with the
 Targeted Respondents: Individuals who had
auction process. As shown in Figure 1 on
made at least one purchase at the Ingham
the next page, more than half were “very
County Tax Foreclosure Auction between
2012 and 2015.
satisfied,” and about a third were
 Individual auction buyers surveyed: 102
“somewhat satisfied.” Among buyers who
 Represents 36% of the total number of
had purchased multiple properties, about
auction buyers from 2012–2015.
three in four (77%) considered their most
recent experience “very typical” of their
experience with the Ingham County property auction in general.
20
When they were asked the reason for the level of satisfaction reported, most
respondents indicated that they were generally satisfied or that the auction process was
efficient and predictable. Among those who had reported dissatisfaction, many found
the auction process overly complicated and confusing or complained that taxes and fees
were not properly disclosed. Several also said they would have liked more open
houses, pictures, or other details about the properties prior to the auction. The full table
of coded open-ended responses is provided in Appendix B.
100%
How satisfied were you with the auction process? (n=98)
90%
80%
70%
60%
54%
50%
40%
34%
30%
20%
10%
0%
Figure 1
5%
5%
Very dissatisfied
Somewhat dissatisfied
Somewhat satisfied
Very satisfied
Key Finding #5: Most of the Auction Buyers
Surveyed Have a Stake in Ingham County
Nearly all auction buyers in PPA’s telephone survey were Ingham County residents,
and many of their auction purchases reflected their interests as local residents.
Relatively few buyers are located outside the county or outside Michigan.
Evidence
As shown in Figure 2, nearly all survey respondents (85%, or 86 individuals) lived in
Ingham County. The high proportion of Ingham County residents among the survey
21
sample is reflective of the overall population of auction buyers. 5 About four in ten lived
in the same city as the property, and 14% lived on the same street or in the auctioned
property itself.
How far away from this property do you live? (n=101)
100%
90%
80%
70%
60%
50%
39%
40%
30%
20%
10%
0%
Figure 2
6%
I live in it
33%
11%
8%
Same street
Same city
Same county
Same state
4%
I live outside
Michigan
The buyers’ goals for the properties also suggest that many had a personal interest in
the properties. While 60% of respondents indicated that their primary goal was to make
a profit, either by renting or reselling the property, 32% purchased the property for their
own use or for family members. In those cases, the intended uses included housing, as
well as land for farming or additional acreage adjacent to their current home or
business.
Based on a list provided by the Ingham County Treasurer’s Office of all buyers between 2012
and 2015 and their mailing addresses at the time of purchase, approximately 70% of buyers were
residents of Ingham County, and over 90% were residents of Michigan.
5
22
Key Finding #6: Cost and Potential Return on
Investment Were the Primary Factors in
Decisions to Purchase Property at Auction
Nearly three-quarters of survey respondents indicated that the cost and/or the potential
return on investment were primary factors behind their decision to purchase a property
at auction.
Evidence
As shown in Figure 3, the most frequently identified drivers behind respondents’
decisions to purchase were cost and potential return on investment. Among the 33% of
respondents who were influenced by a factor not in the survey instrument, more than
half described the property’s location, either in a specific community or in proximity to
the buyer’s current residence, as a driving factor.
What factors drove your decision to purchase the property?
Select all that apply. (n=102)
100%
80%
60%
57%
40%
28%
20%
0%
Figure 3
52%
Cost
27%
33%
22%
Potential return Condition of the Condition of the Access to parks, Other (please
on investment
surrounding
property
public
specify)
neighborhood
transportation, or
other amenities
Key Finding #7: Most Auction Buyers Invest In
Improving Properties After Purchase
Nearly all surveyed buyers indicated that they have already made improvements or
intend to make improvements to the property they purchased.
23
Evidence
As shown in Figure 4, 81% of respondents had already made improvements to the
property, and only 10% indicated that they have no intention to make any
improvements to the property.
Have you made any improvements to the property, or do you intend to?
(n=102)
100%
81%
80%
60%
40%
20%
0%
Figure 4
Yes
8%
10%
Not yet, but I intend to
No, and I don't intend to
1%
Not sure
Although the scale of improvements described and the amount of money invested in
making improvements varied, over 80% of the respondents who made improvements
indicated that they had made substantial structural repairs and replacements, such as
new plumbing, electrical wiring, furnace, and roofs (i.e., interior, exterior, plumbing,
major appliances, and/or electric categories). A breakdown of the general types of
improvements made is illustrated in Figure 5 on the next page. A more detailed
summary of improvements is included in Appendix B.
24
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)
48%
Cleaning and appearance
(i.e., new carpets, painting, landscaping)
40%
Repair/replace exterior structure
(i.e., roof, gutters, siding, windows)
35%
New furnace, water heater,
or other major appliance
28%
New plumbing and/or electric
24%
Demolition of blighted structures
7%
New building or addition
to existing structure
Figure 5
2%
0%
20%
40%
60%
80%
100%
Based on the types of improvements described, it is not surprising that many
respondents reported spending more than $10,000, after the initial purchase price, on
completing various improvements. A summary of spending on improvements is
provided in Figure 6.
25
100%
After the initial purchase price,
about how much cash have you invested in this property? (n=77)
80%
60%
45%
40%
25%
20%
0%
Figure 6
16%
12%
More than $10,000 $5,000-$10,000
3%
$1,000-$5000
Less than $1,000
Not sure
The resources and effort invested in making improvements are also reflected in buyers’
perceptions of the condition of their property before and after improvements were
made. As reflected in Figure 7, among buyers who made improvements, 58% rated the
condition of the property at the time of purchase as a little worse or much worse than
other properties on the same block. After making repairs, the reverse was true, with
58% of those buyers rating the condition of their property as a little better or much
better than other properties on the same block.
How Did The Condition of the Property Compare
with Other Properties on the Same Block? (n=81)
At Time of Purchase
12%
After improvements were made
Figure 7
26
Not Sure
9%
0%
58%
4%
21%
30%
20%
A little worse or much worse
9%
58%
40%
About the same
60%
80%
A little better or much better
100%
Key Finding #8: Prospective Buyers Would Like
More Access to Details About the Condition of
Properties Up For Auction
The desire to have more information about the condition of auction properties,
including more opportunities to walk through properties before bidding, was a
prominent theme among survey respondents.
Evidence
When asked what would help them decide to purchase or improve other properties in
the future, 47% indicated that they would want additional information about the
condition of the property. Among the open-ended responses, many buyers specifically
mentioned that they would want more opportunities to walk through the properties
before an auction. As shown in Figure 8, doing more research about the process ahead
of time and having more information about regulations affecting the property were also
selected as important factors by at least 30% of survey respondents.
100%
If you were to do this again, what would help you decide on whether to
purchase or improve other properties like this?
Select all that apply (n=100)
80%
60%
40%
20%
0%
Figure 8
47%
32%
30%
19%
15%
24%
Information
Doing more
Information
Information
Better
Other (please
about the
research myself about regulations
about the
understanding of
specify)
condition of the
affecting the
surrounding
the level of
property
property
neighborhood effort needed
prior to
occupancy
27
Conclusions and Recommendations ___
Conclusions
Taken together, the findings from this study suggest the following:



There is much room for innovation in the management of tax-foreclosure auctions
and the prevention of tax foreclosure. In addition, there is a need for research to
document the effects of these innovations.
Many of the innovations being implemented by the Ingham County Treasurer’s
Office involve demonstrating practice recommendations noted in the literature;
accordingly, their efforts provide an opportunity for such research.
Many buyers at the Ingham County Tax Foreclosure Auction are Ingham County
residents who invest significantly in their properties after purchase. They are very
interested in more pre-sale information about the properties to help them obtain a
fair price and good value at the auction.
Recommendations
Document Results of Current Innovations
The Ingham County Treasurer’s Office is already making use of several sensible practices to
improve the outcomes of its foreclosure auctions. Many of these practices—e.g., the use of
open houses and other property information—give auction buyers the tools they need to
make well-informed, strategic investment decisions. Because they tend to be Ingham
County residents and to make significant investments of money and effort in improving the
properties purchased, auction buyers have a stake in Ingham County and can be viewed as
an important asset to the broader effort to build stable, prosperous communities
throughout the county. The Ingham County Treasurer’s Office should continue to track
and document the long-term outcomes of its current auction sales practices.
Continue to Seek Buyer Feedback
Continuing to survey auction buyers—particularly new auction buyers—on a regular
basis (e.g., annually) will provide the Ingham County Treasurer’s Office with a better
understanding of buyer characteristics, purchasing habits, and outcomes and to test
whether new efforts to make information available prior to auction have yielded more
satisfied customers. This allows for a test of whether any additional efforts to make
28
information available prior to auction yield more satisfied customers or alter ultimate
outcomes to properties.
Continue to Adjust Auction Practices as Appropriate
In response to the buyer feedback collected for this study, the Treasurer’s Office may
wish to consider the following changes to its approach:


Provide more—and more readily accessible—public information about the specific
characteristics of properties to be auctioned—e.g., increasing the number of
properties that are accessible for public viewing through open houses and providing
more interior and exterior photographs and property details.
Seek coverage in the local news media or convene community meetings to
disseminate accurate, easy-to-understand information about how the foreclosure
auctions work and how to participate in them.
Gain a Deeper Understanding of Other Treasurers’ Auction
Practices
While the interviews conducted for this study suggest that other county treasurers in
Michigan are not making extensive use of innovative practices in managing tax-foreclosure
auctions, a more robust body of data is needed to understand the current practices of
county treasurers across the state as a whole. This indicates a need for primary research to
gather information from county treasurers throughout the state of Michigan. For example,
such research could provide data on:

Innovations they are currently implementing.

Factors that make it difficult to implement these changes.


Changes they would like to make in order to improve auction sales, buyer
satisfaction, and community outcomes.
Level of information they collect regarding buyers or longer-term outcomes for
properties sold.
Consider Increasing Efforts to Educate At-Risk Owners
Given the dearth of literature directly relating to this topic, Ingham County also has an
opportunity to contribute to the evidence base for the effects of financial literacy
interventions on delinquency, forfeiture, and foreclosure rates. Suggested interventions
include:
29

Continue working with the Financial Empowerment Center to ensure that at-risk
households receive free financial counseling aimed at preventing tax foreclosure,
and track the results for these households over time. Examples of such results could
include:




Rates of tax delinquency, forfeiture, foreclosure, and recidivism.
Self-rating of financial literacy.
Document the long-term results in Ingham County from the Michigan State Housing
Development Authority’s Step Forward Michigan program, which provides up to
$30,000 in interest-free loans to help households catch up on delinquent property
taxes. The program recently received new federal funding and was slated for
reactivation in May 2016.6
Continue to hold periodic neighborhood meetings to discuss housing and
foreclosure issues with apartment dwellers, renters, and homeowners in Ingham
County.
6
30
Step Forward Michigan, retrieved April 8, 2016, from www.stepforwardmichigan.org.
Appendix A: Auction Buyer Survey
Methodology _______________________
This section provides additional details on the research methods used for the survey of
buyers at the Ingham County Tax Foreclosure Auction.


PPA developed the survey instrument in consultation with the Ingham County
Treasurer’s Office. The survey was fielded by an independent contractor who
contacted potential respondents by telephone.
The pool of survey respondents consisted of 281 individuals who had purchased
properties between 2012 and 2015. The target number of responses was 100, or 35%
of the total.




The calling protocol was to begin with the most recent year for which buyer data
were available (2015), then move down the list until the goal of 100 survey
respondents was exceeded. As a result, the survey findings include data from
respondents who had purchased properties from 2012 through 2015.
Thirty-five survey respondents had purchased multiple properties from the
county during the study period. However, each survey response represents a
unique individual. In other words, no individual respondent completed more
than one survey. Respondents who had purchased multiple properties were
asked to consider their most recent purchase when answering the survey
questions.
The survey was conducted over the telephone, with the interviewer entering the
response data in real time into SurveyMonkey, an online survey platform.
Data from the completed surveys were analyzed by PPA.


Quantitative data were analyzed in Microsoft Excel and converted into charts.
Open-ended responses were reviewed individually by a PPA researcher who
coded them by theme and calculated the number of responses for each theme.
The resulting numbers were organized in tables, which are provided in
Appendix B.
Research on Buyer Patterns & Alternate Models for Auction Management| Public Policy Associates, Inc.
A-1
Appendix B: Additional Data Tables ____
Table B-1: Coded Open-Ended Responses:
“What is the main reason for the response you gave
[regarding your level of satisfaction with the auction process]?”
Response Category
Generally satisfied
Process was easy, effective, fast, efficient, predictable, well organized
Process was confusing, complicated, inefficient, rushed, or poorly explained
Taxes or fees were too high, unexpected, hidden, or poorly explained
This was my first auction
Would have liked an open house, more pictures, or other property information
Satisfied with treasurer, auctioneer, or other staff
Neutral or unclear response
Attended an open house; satisfied with property information given
Errors, inaccuracies in auction logistics
This was a bad investment, price too high, not a good value
This was a good investment, good price/value
Poor condition or quality of property
Discussed extenuating circumstances outside the Treasurer’s control
Criticized overreach or social agenda on part of Treasurer
Would like auctions more often or online
Number of Responses
62
44
14
14
9
8
6
6
4
4
4
4
3
2
1
1
Table B-2: Coded Open-Ended Responses: “What were your intentions
regarding occupancy when you bought the property?”
Response Category
Resell/flip
New construction
Side-lot acquisition
All of the above
Number of Responses
10
3
2
1
Table B-3: Coded “Other/Specify” Responses: “What factors drove your
decision to purchase the property? Select all that apply.”
Response Category
Location
Near buyer's residence or business, or wanted to live there
Purchased with, for, or on behalf of someone else
Specific characteristics of the property/land
Unclear response/nonresponsive
Timing
Number of Responses
11
9
5
4
4
1
B-1
Table B-4: Coded “Other/Specify” Responses: “What was your primary
goal in purchasing this property? Please select only one.”
Response Category
Resell, flip, or rent for profit
Use vacant land
Build new
Improve neighborhood, social good
Number of Responses
11
11
5
1
Table B-5: Coded “Other/Specify” Responses: “If you were to do this
again, what would help you decide on whether to purchase or improve
other properties like this?”
Response Category
Make it easier to thoroughly research, visit, and enter the property
Cost, economy
Know regulations, taxes, fees, or environmental issues applying to property
Remove deed restrictions or other regulations; obstructionism by city
Will not do again
Treasurer outreach to buyers; customer service by treasurer staff
Know if property was rental before
Remove "unworkable" properties from auction
Bad neighbors
Would I want to live there
Post information on auction runner-ups
Number of Responses
19
11
9
4
2
2
1
1
1
1
1
Table B-6: Coded Open-Ended Responses: “Can you describe the most
significant improvements you have made to the property?” (n=82)
Response Category
Repair/remodel interior structure (i.e., bathrooms, kitchen, floors, drywall)
Cleaning and cosmetic improvements (new carpets, painting, landscaping)
Repair/replace exterior structure (i.e., roof, gutters, siding, windows)
New furnace, water heater, or other major appliance
New plumbing and/or electric
Demolition of blighted property
Build new/addition
Unclear
B-2
Number of Responses
39
33
29
23
20
6
2
1
Appendix C: Auction Buyer Survey
Instrument _________________________
On behalf of the Ingham County Treasurer, thank you for agreeing to participate in this
short survey. Again, your responses should be in reference to the property at
ADDRESS, which you purchased on DATE.
1. Do you still own the property at ADDRESS?
a. Yes
b. No
c. [DK]
d. [REFUSED]
2. How satisfied were you with the auction process?
a. Very satisfied
b. Somewhat satisfied
c. Somewhat dissatisfied
d. Very dissatisfied
e. [DK]
f. [REFUSED]
3. What is the main reason for the response you gave?____________________
4. BUYERS OF MULTIPLE PROPERTIES ONLY: To what extent was this experience
typical of your experiences in general with purchasing at the Ingham County
Treasurer’s Real Estate Auction?
a. Very typical
b. Somewhat typical
c. Not very typical
d. Not at all typical
5. What were your intentions regarding occupancy when you bought the property?
READ OPTIONS:
a. Occupied by you
b. Occupied by renters
c. Occupied by members of your family
d. Vacant
C-1
e. Other/please specify__________
f. [DK]
g. [REFUSED]
6. What factors drove your decision to purchase the property? Select all that apply.
READ OPTIONS:
a. Cost
b. Potential return on investment
c. Condition of the property
d. Condition of the surrounding neighborhood
e. Access to parks, public transportation, or other amenities
f. Other/please specify__________
g. [DK]
h. [REFUSED]
7. What was your primary goal in purchasing this property? Select only one. READ
OPTIONS:
a. Make a profit by reselling it
b. Make a profit by renting it out
c. Own my own home
d. Provide a home for family members
e. Other/please specify__________
f. [DK]
g. [REFUSED]
8. To what extent did you achieve that goal?
a. Completely
b. Somewhat
c. Only a little
d. Not at all
e. [DK]
f. [REFUSED]
9. At the time of purchase, how did the condition of the property compare with other
properties on the same block? READ OPTIONS:
a. Much better
b. A little better
c. About the same
d. A little worse
e. Much worse than others on the block
C-2
f. [DK]
g. [REFUSED]
10. Have you made any improvements to the property?
a. Yes
b. No
c. [DK]
d. [REFUSED]
IF ANSWER IS NO, SKIP TO #15
11. IF “Yes” TO QUESTION 10: Can you briefly describe the most significant
improvements? [open end]
12. IF “Yes” TO QUESTION 10: After the initial purchase price, about how much cash
have you invested in this property?
__________________[open end; round to the nearest thousand] PROMPT IF
NEEDED
a. Less than $1,000
b. $1,000-$5000
c. $5,000-$10,000
d. More than $10,000
e. [DK]
f. [REFUSED]
13. IF “Yes” TO QUESTION 10: After you made improvements to the property, how did
the condition of the property compare with other properties on the same block?
READ OPTIONS:
a. Much better
b. A little better
c. About the same
d. A little worse
e. Much worse than others on the block
f. Did not make improvements
g. [DK]
h. [REFUSED]
14. IF “Yes” TO QUESTION 10: What were the biggest barriers to improving this
property? SELECT ALL THAT APPLY:
a. High cost
C-3
b.
c.
d.
e.
f.
g.
h.
i.
Low potential return on resale value
Low potential return on rental fees
Local or state regulations
Unexpected additional improvements needed
Lack of interest or time to do the work
There were no big barriers
[DK]
[REFUSED]
SKIP TO #17
15. IF “No” TO QUESTION 10: Do you intend to make improvements?
a. Yes
b. No
c. [DK]
d. [REFUSED]
16. IF “Yes” TO QUESTION 15: What are the biggest barriers to improving this
property? SELECT ALL THAT APPLY:
a. High cost
b. Low potential return on resale value
c. Low potential return on rental fees
d. Local or state regulations
e. Unexpected additional improvements needed
f. Lack of interest or time to do the work
g. There were no big barriers
h. [DK]
i. [REFUSED]
17. If you were to do this again, what would help you decide on whether to purchase or
improve other properties like this?
a. Doing more research myself
b. Information about the condition of the property
c. Information about the surrounding neighborhood
d. Information about regulations affecting the property
e. Better understanding of the level of effort needed prior to occupancy
f. Other/specify____________
g. [DK]
h. [REFUSED]
C-4
18. How far away from this property do you live?
a. I live in it
b. Same street7
c. Same city
d. Same county
e. Same state
f. I live outside Michigan
g. [REFUSED]
19. Would you consent to letting us share your individual survey responses with the
Ingham County Treasurer’s office?
a. Yes
b. No
On behalf of the Ingham County Treasurer, thank you very much for taking the time to
answer these questions.
This response option was added after the start of the survey because several initial respondents stated
that they lived on the same street as the auctioned property. Because of its late addition, 18 survey
respondents were not given this response option.
7
C-5
Appendix D: Literature Review Sources
Alexander, Frank S. Land Bank Authorities: A Guide for the Creation and Operation of Local
Land Banks (New York, NY:, Local Initiatives Support Corporation, 2005).
“Buyer beware: Tips for buying a tax foreclosed parcel from the county.” Satayut, Lisa.
Mlive.com (August 16, 2013). Retrieved April 4, 2016, from http://www.mlive.com/
news/jackson/index.ssf/2013/08/buyer_beware_tips_for_buying_a.html
Borowy, Tyler, Mary Beth Graebert, Benjamin Calnin, and Brianna Acker. Economic
Impacts of the Ingham County Land Bank (2006–2012): A Report Prepared By the MSU Land
Policy Institute for the Ingham County Land Bank Fast Track Authority, Treasurer’s Office,
Ingham County, Michigan. Lansing, MI: Michigan Treasurer’s Office, 2013. Retrieved
April 19, 2016, from http://landpolicy.msu.edu/uploads/files/Resources/
Publications__Presentations/Reports/LPI/2013EconImpactsICLBReport_ICLBLPI_Final_
082213.pdf.
Carr, James H., and Michelle Mulcahy. Rebuilding Communities in Economic Distress:
Local Strategies to Sustain Homeownership, Reclaim Vacant Properties, and Promote
Community-Based Employment. Washington, DC: National Community Reinvestment
Coalition, 2010. Retrieved April 19, 2016, from
http://www.azwestern.edu/Institutional_Research/downloads/NCRC%20%20Rebuilding%20Communities%20in%20Economic%20Distress%2010-10.pdf.
Center for Community Progress. Detroit's Property Tax Policies and Practices: An
Opportunity for Reform. Flint, MI: Center for Community Progress, 2015. Retrieved April
25, 2016, from http://www.communityprogress.net/filebin/2016_CommunityProgress_
PolicyBrief_DetroitTax_0415.pdf.
Citizen’s Housing and Planning Association. Back on the Roll in Massachusetts: A Report
on Strategies for Returning Tax Title Property to Productive Use. Boston: Citizen’s Housing
and Planning Association, 2000. Retrieved March 31, 2016, from
https://www.chapa.org/about-chapa/chapa-publications/back-roll-massachusettsreport-strategies-return-tax-title-properties.
D-1
Coenen, Catherine, John Drain, Oana Druta, Gregory Holman, Te-Ping Kang, Pramoth
Kitjakarnlertudom, Robert Linn, Daniel Stern, and Jordan Twardy. From Revenue To
Reuse: Managing Tax-Reverted Properties In Detroit. Ann Arbor, MI: University of
Michigan, 2011. Retrieved April 4, 2016, from https://deepblue.lib.umich.edu/bitstream/
handle/2027.42/110954/revenue_to_reuse.pdf?sequence=1&isAllowed=y.
Dewar, Margaret, Eric Seymour, and Oana Druță. "Disinvesting in the City: The Role of
Tax Foreclosure in Detroit." Urban Affairs Review 51, no. 5 (2015): 587-615. Retrieved
April 4, 2016, from http://uar.sagepub.com/content/51/5/587.short.
Dewar, Margaret. "Reuse of Abandoned Property in Detroit and Flint Impacts of
Different Types of Sales." Journal of Planning Education and Research 35, no. 3 (2015): 347368. Retrieved April 18, 2016, from
http://jpe.sagepub.com/content/35/3/347.abstract?rss=1.
Dewar, Margaret. "Selling Tax-Reverted Land: Lessons From Cleveland and Detroit:
New This Spring Westchester." Journal of the American Planning Association 72, no. 2
(2006): 167-180. Retrieved April 18, 2016, from
http://www.tandfonline.com/doi/abs/10.1080/01944360608976737.
Dewar, Margaret. "The Effects of Cities of “Best Practice” in Tax Foreclosure: Evidence
from Detroit and Flint," CLOSUP Working Paper Series Number 2 (2009).
Fernandes, Daniel, John G. Lynch, Jr., and Richard Netemeyer. "The Effect of Financial
Literacy on Downstream Financial Behaviors", in Advances in Consumer Research Volume
40, eds. Zeynep Gürhan-Canli, Cele Otnes, and Rui (Juliet) Zhu, (Duluth, MN :
Association for Consumer Research, 2013), 1052-1052.
Gerardi, Kristopher, and Wenli Li. "Mortgage Foreclosure Prevention Efforts."
Economic Review-Federal Reserve Bank of Atlanta 95, no. 2 (2010): II. Retrieved April 11,
2016, from http://search.proquest.com/openview/
c286eba19f4cf0039481e1514262d663/1?pq-origsite=gscholar.
Graebert, Mary Beth, Yue Cui, Huiqing Huang, and Lauren Bretz. Economic Impacts of
Property Tax-Foreclosure Auctions in Ingham County, Michigan: A Report Prepared by the
MSU Land Policy Institute for the Ingham County Treasurer's Office, Ingham County,
Michigan. Lansing, MI: Ingham County Treasurer, 2015. Retrieved April 19, 2016, from
http://landpolicy.msu.edu/uploads/files/Resources/Publications__Presentations/Reports
/LPI/EconImpactTaxForeclosureAuctionInghamCtyMIRpt_LPI_FINAL_Accessible_101
615.pdf.
D-2
Hackworth, Jason, and Kelsey Nowakowski. "Investment in Disinvestment: A critical
examination of forfeited land investors in Toledo, Ohio from 1993 to 2011."
Unpublished paper (2014). Retrieved April 19, 2016, from
http://individual.utoronto.ca/hackworth/toledo.pdf.
Immergluck, Dan. "Distressed and Dumped: Market Dynamics of Low-Value,
Foreclosed Properties During the Advent of the Federal Neighborhood Stabilization
Program." Journal of Planning Education and Research 32, no. 1 (2012): 48-61. Retrieved
April 4, 2016, from http://jpe.sagepub.com/content/32/1/48.short.
Kingsley, G. Thomas, Kathryn L.S. Pettit, Leah Hendey, W.M. Rich, M. Carnathan,
A. Cole, and P. Tatian. Addressing the Foreclosure Crisis: Action-Oriented Research in Three
Cities. Washington, DC The Urban Institute, 2009. Retrieved April 4, 2016, from
http://tracyvinson.com/research/addressing%20foreclosure.pdf.
Mallach, Alan. "Abandoned Property: Effective Strategies to Reclaim Community
Assets." Housing Facts and Findings 6, no. 2 (2004). Retrieved April 18, 2016, from
http://content.knowledgeplex.org/kp2/cache/documents/30370.pdf.
Mallach, Alan. Bringing Buildings Back: From Abandoned Properties to Community Assets
(International Planning Studies, 2006, rev. 2010).
Mallach, Alan. Meeting the Challenge of Distressed Property Investors in America's
Neighborhoods. New York: Local Initiatives Support Corporation, 2010. Retrieved
March 31, 2016, from http://www.instituteccd.org/uploads/iccd/documents/
102010_distressed_property_investors.pdf.
Medina, J., J. Brooks, and R. Haughey. Integrating Financial Empowerment Strategies
into Housing and Homelessness Prevention Program. Washington, DC: Corporation
for Enterprise Development, 2012. Retrieved April 1, 2016, from
http://cfed.org/assets/pdfs/Integrating_Financial_Empowerment_Strategies.pdf.
National League of Cities and Corporation for Enterprise Development. Taking the
First Step: Six Ways to Start Building Financial Security and Opportunity at the Local
Level. Washington DC: National League of Cities and Corporation for Enterprise
Development, 2012. Retrieved April 1, 2016, from
http://cfed.org/assets/pdfs/Taking_the_First_Step.pdf.
D-3
Quercia, Roberto G., Spencer Cowan, and Ana Moreno. "The Cost-Effectiveness of
Community-Based Foreclosure Prevention." Joint Center for Housing Studies Working
Paper Series, BABC (2005): 04-18. Retrieved April 11, 2016, from
http://www.hocmn.org/wp-content/uploads/2012/10/MFP_Full-Report.pdf.
Weber, William. "Tax Foreclosure: A Drag on Community Vitality or a Tool for
Economic Growth?" University of Cincinnati Law Review 81, no. 4 (2013): 1615-1649.
Wiedrich, Kasey, Nathalie Gons, J. Michael Collins, and Anita Drever. "Financial
Counseling and Access for the Financially Vulnerable: Findings from the Assessing
Financial Capability Outcomes (AFCO) Adult Pilot." Washington, DC: Corporation for
Enterprise Development, 2014. Retrieved April 7, 2016, from
http://cfed.org/assets/pdfs/AFCO_Adult_Pilot_Report_Final.pdf.
D-4
Appendix E: County Treasurer Interview
Guides ____________________________
Interview Instrument: Ingham County Treasurer’s
Real Estate Auction—Contextual Information
Thank you for taking the time to speak with me today. Again, the purpose for our
conversation is to provide some background information on the Ingham County
Treasurer’s Real Estate Auction, with an emphasis on how you arrived at your current
approach to the auction process and the effects you’re seeing from it. This conversation
shouldn’t take longer than an hour.
Alternate Models
1. First, I’d like you to tell me how a few specific features of the Treasurer’s Auction
have evolved in the last several years:
a. Auction dates (3rd auction)
b. Payment terms (several changes)
c. Owner occupancy covenants
i. Owner occupancy
ii. Historic
d. Paying summer taxes to get deed (started 2015)
e. Reverter clause existence (what is nature of?)
f. Counter sales (started 2015)
g. The connection between the Treasurer’s Auction and the Land Bank
i. Probe: How do you determine which properties go to auction and which
ones go to the Land Bank?
ii. The Land Bank has a very impressive success rate compared to the auction
results. What changes would have to happen to move more properties
through the Land Bank?
h. Making warranty deeds available for most properties to reduce the risk of
clouded title
E-1
i. Requiring that only ten percent of the purchase price be paid on the day of the
auction
j.
Prohibiting those who owe delinquent taxes from participating in the auction
2. What impact have these features had on the outcomes from the Treasurer’s auction?
In what ways could they be improved?
a. Probe: Internal policy? Statutory change?
3. Next I’d like to ask about the characteristics of auction buyers. In what ways has
your roster of auction buyers changed over time? About how often do you see
buyers who haven’t purchased from the property auction before?
a. In what ways does the Treasurer’s Office interact with auction buyers after the
auction purchase?
4. Now I’d like to talk about how the foreclosure auction gets publicized. What do you
do to get the word out? What is the result?
a. To what extent do you use online venues like the county website or social media
to provide information about the foreclosure options and the properties
available? How about social media?
b. To what extent have you used other avenues like news articles (not counting
public notices) to inform people about the auctions?
5. Do you have any ability to set interest rates on delinquent property taxes, or is there
a set rate you have to follow?
a. Probe: Could you see an advantage in being able to set interest rates? If so, how
feasible would it be to make this possible?
6. Could you see an advantage in omitting the second auction, or allowing variable
minimum bids in the second auction?
7. Are there any other changes to the current auction process that you would like to
see? What would be required to make those changes happen?
E-2
Foreclosure Prevention
Now I’d like to ask a few questions about the foreclosure prevention component of our
study.
8. I’ve seen the pamphlet that the County Treasurer has released with information on
tax foreclosure prevention. What other measures has the County Treasurer’s Office
taken to combat tax foreclosure?
a. Probe: To what extent have you collaborated with the Lansing Financial
Empowerment Center to provide counseling on tax foreclosure?
b. Probe: To what extent do you think people are aware of tax exemptions that
could ease their property tax burden? What role has the County Treasurer’s
Office played in disseminating that information?
9. I’d like to ask about the Step Forward Michigan program, which is going to begin
releasing funds again this year. How has the program fared in Ingham County?
What are your impressions about the outcomes of that program?
10. Do you have any other thoughts about the auction process or preventive measures
for avoiding tax foreclosure that we haven’t talked about today?
E-3
Interview Instrument: Alternate Models for
Auction Sales Management and Property
Disposition
Thank you for taking the time to speak with me today. Again, the purpose for our
conversation is to provide some information on [County Name] County’s approach to
managing tax foreclosure auctions, with an emphasis on how you arrived at your current
approach to the auction process and the effects you’re seeing from it. The Ingham County
Treasurer, Eric Schertzing, is interested in improving Ingham County’s auction process by
learning what approaches other counties are using. This conversation shouldn’t take longer
than 20-30 minutes.
I can’t promise total confidentiality because yours was on a short list of counties that Eric
discussed with us beforehand as being possibly comparable to Ingham County in some
ways. However, neither you nor your county will be specifically named in our report.
Alternate Models
1. First, I’d like to ask you about a few specific features of your county’s tax foreclosure
auction:
a. What measures does your county take to reduce the risk of clouded title for
auctioned properties?
b. What are your county’s requirements in terms of payment on the day of the auction?
c. Does your county apply any covenants or other restrictions on the use of auctioned
properties?
i. Probe: Residential versus rental
ii. Probe: Historic
d. Does your county have any restrictions to prevent individuals who owe delinquent
taxes from participating in the auction?
e. Describe for me the connection between the Treasurer’s Auction and the Land Bank.
i. Probe: How do you determine which properties go to auction and which ones
go to the Land Bank?
ii. What are your impressions about the success rate of the Land Bank compared
to the tax foreclosure auction in terms of returning properties to productive
use?
E-4
2. Apart from what I’ve already mentioned, what other measures does your county take to
improve auction outcomes?
a. Probe: How effective have those measures been?
3. What changes would you like to make in order to improve outcomes in terms of
returning auctioned properties to productive use and making neighborhoods more
stable?
a. Probe: What would it take to make that change happen? Internal policy change?
Agreement among community leaders? Statutory change?
4. Next I’d like to ask about the characteristics of auction buyers. In what ways has your
roster of auction buyers changed over time? About how often do you see buyers who
haven’t purchased from the property auction before?
5. Now I’d like to talk about how the foreclosure auction gets publicized. What do you do
to get the word out? What is the result?
a. To what extent do you use online venues like the county website or social media to
provide information about the foreclosure options and the properties available?
How about social media?
b. To what extent have you used other avenues like news articles (not counting public
notices) to inform people about the auctions?
6. Do you have any other thoughts about the foreclosure auction process that we
haven’t talked about today?
E-5

Ingham County Buyer Research Final Report

Transcription

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