Owners Rebuying Their Foreclosed Properties

[HistoryNotHisStory]

The Detroit News reported that Homeowners are buing back their foreclosed properties from the County via the County Property Tax Auction.

http://www.detnews.com/article/20110...reclosed-homes

Local Poltiicans want a state law that bans the former homeowners from buying back his property from the County Tax Sale.

This is crazy.

The real problem is that the Taxes in Detroit are TOO HIGH!

Detroit —Landlord Jeffrey Cusimano didn't pay property taxes on
seven of his east-side rentals for three years, owing the city of Detroit more
than $131,800.


Typically, that would mean losing the properties. But Cusimano not only got
to keep them — his debt, including interest, fees and unpaid water bills, was
virtually wiped free....

It's legal. But that doesn't mean it's fair, said homeowner Marilynn
Alexander, who lives on Fairmount next door to one of Cusimano's rentals. The
landlord owed $26,200 in taxes and other fees on the bungalow, but bought it
back in October for $1,051.


Critics described it as a growing problem as the foreclosure crisis deepens.
A record number of properties — nearly 14,300 — are expected to be auctioned
this fall, and officials predict more owners will try to buy back their
properties.


The News identified about 200 of nearly 3,700 Detroit properties sold at
auction last year that appeared to be bought back by owners, some under the
names of relatives or different companies and many for $500. The total in taxes
and other debts wiped away was about $1.8 million.


"I don't think it's OK; it's just how things are," said Cusimano, who argues
Detroit taxes are so unfairly high he was forced to buy back the foreclosed
properties.


At the September auction, the properties' prices are the debt that's owed.
But in October, the county treasurer sells off whatever is left at a $500
opening bid. That's where most of the sales happen, including owners buying back
their properties.


There's an effort in Lansing to ban the practice, but others defend it.


Many of those defenders are struggling homeowners, said Ted Phillips, who
runs a legal advocacy nonprofit agency. He helped about 140 families buy their
houses back last year and expects to "easily" double that in October.


"It's absolutely better to have folks in their homes," said Phillips, executive director of the United Community Housing Coalition.



"The system is just so broken. This is a little bit of a way to correct the broken system. Not a great way, but a way."


But he agreed that others who can afford to pay the taxes are exploiting the
loophole and should be stopped.


Besides Cusimano, well-known land speculator Michael Kelly bought back three
properties last fall through a company he is affiliated with to erase a $37,595
debt. The News profiled the Grosse Pointe Woods investor who, through the tax
sale, gained control of more Detroit properties than any other private landowner
as of earlier this year.


Cusimano, who owns about 80 rentals, makes no apologies and blamed Detroit
for failing to reduce his assessments on homes whose values have crashed. He
said he's got small bungalows with $4,000-a-year tax bills, which he argues
sometimes is more than the house is worth.


"The taxes are ridiculous," Cusimano said. "I don't even pay that for my
house in Clinton Township."


Huge debts wiped clean

...


One owner bought back her storefront on West Seven Mile last year for
$15,000, eliminating nearly $37,000 in debt. Another owed $23,100 on two
buildings and a parking lot on Conant, but bought each back for the minimum
$500.


And Cusimano got his seven rentals back for $4,051, erasing nearly $128,000
in property taxes and other government liens.


Cusimano, a landlord in the city for two decades, said the method wasn't his
first choice. He said he tried to appeal his high taxes without success. He
admits he's taking advantage of the loophole, but said he must to survive the
tough economic times.


"You just have to go with how the system goes," said Cusimano. "I have been
learning that in the last few years."


Owners often buy back their properties using the same name under which they
lost them. And there's generally a low risk of getting outbid because of the glut of vacant land. Last fall, at least 6,847 parcels in Detroit went into the city's inventory after they didn't sell at
auction.

....

"The taxes are more than it's worth. The houses don't have any value at all.
If the properties were worth the value of the houses, people would pay the
taxes."


Detroit's tax rates — 65 mills for homeowners and 83 mills on other property
owners — are the highest in the state, according to a recent Citizens Research Council of Michigan report. The average statewide rate is 31 mills for homeowners and 48 mills for other property owners.


Dan Lijana, a spokesman for Mayor Dave Bing, said the city has been reducing
residential assessments "in the double-digit range" over the last four years,
but that "distressed sales," such as the sales from the county auction, can't be
a factor.


Cusimano's neighbors on Fairmount, a street in northeast Detroit with mostly
maintained aluminum-sided bungalows, argued they are paying taxes and were
angered when told of the loophole.


"OK, he gets to buy his back and my mother has to struggle?" said Tekena
Crutcher, who lives with her mom. "The city is the way it is because of people
like him not paying his taxes."


Lijana said City Hall is looking at the city's tax structure and the auction
loophole.

"We are working to make the City of Detroit run more like a business," Lijana
said in an email. "This is an example of a challenge that we are looking to
address both from a fiscal perspective and as a land use policy."


Legislation aimed to stop it

Wayne County Chief Deputy Treasurer David Szymanski, whose office runs the
auction, said it's frustrating to see people ditch tax obligations, but the law
allows for it.

"There is no restriction in the law about who can or cannot bid at auction,"
Szymanski said. "It's such a tough issue."

"It's clearly in the best interest to keep people in their homes. But it's a
very bitter pill for the people next door."


Mah-Lon Grant, 62, and Gloria Grant, 57, said they would be homeless and
their house likely gutted if Phillips' nonprofit group hadn't helped them buy it
back.


Their debt only was about $5,500, but it was overwhelming.


The couple got behind on their taxes after losing their landscaping business
when Mah-Lon Grant went to prison in 2005 for five years on felony firearm and
assault charges, according to state records. He said the situation got out of
control while he was defending himself as he collected a debt from an associate.



"If we had to do it ourselves, I don't think we would have been able to do
it," Mah-Lon Grant said. "There's no way we could catch up."


"We are barely surviving."


The couple was able to buy the house, where they've lived for 34 years, back
at auction for $500. They live there with their 22-year-old son and 15-month-old
great-granddaughter.


He said his family is different from other property owners using the
loophole.


State Sen. Tupac Hunter, D-Detroit, has introduced legislation to ban buyers
who owe back taxes.


He said he's looking to retool it to make sure nonprofits can buy properties
on behalf of families, such as the Grants.


But Hunter said he wants to stop "land speculation and the scavenging
currently going on in Wayne County's tax foreclosure auctions."


"My intent is to make it more difficult for land speculators to game the
system," Hunter wrote in an email.


Szymanski said his office opposes Hunter's bill because it's too restrictive,
but is brainstorming ways to prevent owners who can pay their taxes from buying
back properties.


"We want to help people in need, not make people rich," Szymanski said.


But Shifman and others who oppose limits on who can buy at auction said it
will only hurt taxpayers further.


All the revenue raised at the auction goes back to the city, schools and
library.

From The Detroit News: http://detnews.com/article/20110907/...#ixzz1XHeU8ED1

[SWMAP]

Gaaaa! They have to tie this loophole up. The re-buyers, who are too poor to pay their taxes will still be too poor. They will own the house three more years and be too poor to fix it up, to put on a new roof or replace the furnace or anything. The hosusing stock will get worse and worse.

The landlords will continue to milk the property of all value and also not improve the housing stock to increase personal return on [[miniscule ) investment.

There is no hope at all for the City if this continues.

WHY should i pay my taxes? There is no sanction if you don't.

[bailey]

Gaaaa! They have to tie this loophole up. The re-buyers, who are too poor to pay their taxes will still be too poor. They will own the house three more years and be too poor to fix it up, to put on a new roof or replace the furnace or anything. The hosusing stock will get worse and worse.

The landlords will continue to milk the property of all value and also not improve the housing stock to increase personal return on [[miniscule ) investment.

There is no hope at all for the City if this continues.

WHY should i pay my taxes? There is no sanction if you don't.

But if the property only has a fair market value of $500.00--which is determined at auction---yet is being taxed 68-85 mills on an alleged value many times that, where is the fairness there? why would one pay the outrageous taxes on an artificially inflated value? At least the homes are staying occupied and not simply being abandoned.

[SWMAP]

Property taxes have been the most efficient way to collect the funds needed to provide services. There is no sustainable way to run a city with property taxes based on "market rates" of home value.

I pay a little more than $1000 per year for a small frame house in SW Detroit. That seems fair to me. maybe there should be a flat rate for homeowners and another rate for landlords trying to get rich by milking their properties.

I don't know the answer, but someone has to pay the bills and these tax deadbeats aren't getting it done.

[bailey]

Property taxes have been the most efficient way to collect the funds needed to provide services. There is no sustainable way to run a city with property taxes based on "market rates" of home value.

I pay a little more than $1000 per year for a small frame house in SW Detroit. That seems fair to me. maybe there should be a flat rate for homeowners and another rate for landlords trying to get rich by milking their properties.

I don't know the answer, but someone has to pay the bills and these tax deadbeats aren't getting it done.

There are two rates. It's called the principle residence exemption. YOU pay FAR less for your home as it is your one and only principle residence than any landlord does on his rental property[[ies). However, that doesn't address the issue. If the city says the property is worth 10 times what its actual fair market value is and then insists on taxing you on that made up/totally fictitious/completely unrealistic number....who is ripping whom off?

[SWMAP]

Most of the new landlords do not pay anything but the residential rate. They are renting out houses to section 8 customers, etc.

What about the millages/ Paying taxes on a $500 piece of property in the city at the level you are suggesting cannot possibly support schools, parks, libraries. There are 10,000 properties in Detroit being auctioned now. What if most of these go for $500 to people who will just not pay taxes in a new cycle of three years because they got away with paying only $500 for the last three years? How can we go on? Do you have any ideas?

[bartock]

Property taxes have been the most efficient way to collect the funds needed to provide services. There is no sustainable way to run a city with property taxes based on "market rates" of home value.

I pay a little more than $1000 per year for a small frame house in SW Detroit. That seems fair to me. maybe there should be a flat rate for homeowners and another rate for landlords trying to get rich by milking their properties.

I don't know the answer, but someone has to pay the bills and these tax deadbeats aren't getting it done.

I pay 18 additional mills on my rental [[in the inner suburbs), equating to more than $1,200 a year more than I would if it were my primary residence.

[bailey]

Most of the new landlords do not pay anything but the residential rate. They are renting out houses to section 8 customers, etc.

it makes no difference who they rent to, if it is not their principle residence they don't get the 18 mil relief. "To qualify for a PRE, a person must be a Michigan resident who owns and occupies the property as a principal residence". If they are claiming PRE on multiple properties, well, that's a job for enforcement.

What about the millages/ Paying taxes on a $500 piece of property in the city at the level you are suggesting cannot possibly support schools, parks, libraries. There are 10,000 properties in Detroit being auctioned now. What if most of these go for $500 to people who will just not pay taxes in a new cycle of three years because they got away with paying only $500 for the last three years? How can we go on? Do you have any ideas?

Stealing from your taxpayers by extremely over inflating valuations to make up the shortfall isn't exactly sustainable either.

Here's two suggestions. Eliminate NEZs . Stop allowing people who bought $500,000 condos skate by for 12 years paying a fraction of the cost to service them. #2, I would suggest the city buy the 10,000 properties and tear them down. It would have two benefits, it would remove the excess supply from the equation and punish deadbeat landlords trying to game the system.

Of course neither of those will happen because a) very few will invest in the trendy "high end" lofts, condos and neighborhoods in Detroit without a subsidy and b) Detroit can't afford or figure out how to tear down the current blighted city owned properties....let alone add 10k more.

[Goose]

The property tax based on value is a progressive tax that all you liberals should be happy about. The rich pay more for the giant valuable houses and the middle to low value homes pay less. Very low income people can often apply for hardship where the property taxes are even further reduced.

How about a flat $XXXX per home no matter what the value? Does the homeowner in a $250,000 home recieve more services than a person living 1 mile away in a $125,000 house?

[Schoolcraft]

These guys are full of it. The highest taxes go on most of these properties are $1k-2k if they're assessed correctly... that's how much my taxes are for the houses I bought in the auction. They're just suburbanites giving a BS excuse for raping a city that won't defend itself. If you own 80 properties in the city you should be publicly kicked in the ass for saying "I can't pay taxes." These guys buy properties at $500 and then rent to people at $400 a month who don't know that they could have purchased these properties for themselves and say "I can't pay the taxes." No, what you mean is you can't make a bigger profit if you pay the taxes... greedy SOBs

[JStone]

I agree with Schoolcraft.

As for eliminating the NEZ, I disagree. 65 + mils on a house worth $20k is not that outrageous, but when you had folks [[prior to the bubble bust) buying market rate homes at $150-200K, 65 + mils is a deal crusher. We need at least a tax structure that competes with other cities around the area if we expect people to move and invest here. All the money saved on NEZ abatements, goes out the window with your first year car and homeowners insurance, not to mention your first break-in.

Maybe it doesn't matter much now when you can buy a house or condo for a quarter of the bubble prices because once again, if you're getting a house that cheap, you can afford the higher milage rate.

Personally, I would have never been able to afford my modest sized house back in the day, if it was not for the NEZ. I have an idea, let me buy my house again for a 1/3 of what I owe, and I will gladly pay the unabated tax rate. Release me from my chains. I long to be a free man like the NEO-Detroitist Homeowners of 2011. I want to be a DIY business owner and raise chickens and grow vegetables and advocate for bicycle riding. FREEDOM!!!

[internet_pseudopod]

So what Jeffrey Cusimano is telling us is that either his properties aren't renting or his business model doesn't include paying the taxes that are included in the tenants rent.

[Detroitej72]

It's not suprising that slumlords are taking advantage this loophole. It's not shocking that Detroit's inept leadership has allowed this to happen. What is suprising is the people here that are defending this deplorable practice.

[bailey]

So what Jeffrey Cusimano is telling us is that either his properties aren't renting or his business model doesn't include paying the taxes that are included in the tenants rent.

Or it tells us that in order to be able to pay the exorbitant taxes based on inflated valuations he must charge a rent that no renter will pay in the Detroit market.

[davewindsor]

One point stuck out at me about the article did make sense:

"Mah-Lon Grant, 62, and Gloria Grant, 57, said they would be homeless and
their house likely gutted if Phillips' nonprofit group hadn't helped them buy it
back."

If no one buys the house after auction, it gets stripped/gutted, becomes another crime center, and it makes the neighbourhood worse off than letting the original owners buy it back.


It's an open market system. If the house is sold for more than the taxes at auction, the taxpayers get their money back. But, if no one else wants it and if the original owners don't buy it back, the house will never be rehabbed and it will be a blight kept standing or demolished at taxpayers expense. If the house is sold back at discount, at least the original owners will maintain it and the city/county at least gets some money back without having to pay anything like it would if it sat in the city/county's stewardship.

Even if a big landlord buys it back, at least he'll spend some money to maintain it so it's in rentable condition and the city inspectors can issue him work orders to maintain it instead of the taxpayers paying for the building's upkeep.

BUT, I do see a case for a CHANGE in the LAW that might say if a landlord has outstanding work orders by the city on any of his properties that were never rectified at the time of bidding that he should be prohibited from bidding on any properties at auction or buying after auction.

Other than that, it's the lesser of two evils. But, if the original owners can't have the opportunity to buy it back if no one else is interested, there will be an even bigger mess imo..

[skyl4rk]

As a homeowner, it is risky to let your home go through this process.

If the Land Bank ever starts getting active, they could hold properties and sell them to owner occupied buyers on land contract.

[Detroitej72]

I'd rather see owner-occupier's buying the homes on land contract than these scum-bag slumlords who play the system. At least you have a better chance of the owner/occupier keeping the property up. Most of the slumlords couldn't care less about their property and are only interested in milking it for as much as they can before the city condemns it.

[canuck]

Two sides of a coin;
The funny thing is in Canada, we have a city like Vancouver that has opened its arms to very wealthy investors from overseas. The real estate agencies, the municipality and the province have done nothing to stop the waves of speculation, all of them, even a bunch of NDP governments kept stoking the fires of speculation. The result is that nobody in Calgary or Toronto wants to be transferred there, because unless you are a millionaire, you cant afford to buy anything there anymore. The rate is now estimated at 92% of median household revenue going to mortgage and home expenses. They have a hard time attracting upper middle class professionals, never mind regular folk. Detroit, barring all other social evils, has at least affordable real estate. But I cant imagine the municipality taking care of business if the tax base is continually eroded.

[internet_pseudopod]

Or it tells us that in order to be able to pay the exorbitant taxes based on inflated valuations he must charge a rent that no renter will pay in the Detroit market.

In that case, the question remains: why is he still in the Detroit market accruing delinquent taxes on a constant basis? According to the story approximately 1 year ago he bought a house for $1050 that somehow accrued $26K in taxes and other fees in that same one year. It is a business plan albeit a fairly poor one. It appears to go like this:

a) buy worthless house
b) accrue taxes and fees[[not paying water bill/not bringing the house to code)
c) have house go into foreclosure, buy back at auction
d) screw honest tax payers
e) profit!!!!

He could buy houses in his native Clinton Township where taxes on his undoubtedly palatial estate do not even equal the oppressive $4000 he pays[[ or doesn't) in Detroit. In that place he could charge a decent rent that would cover the taxes but instead he would prefer to do business where he can get over on you. His business model is to make you cover his business costs while he gets the profit. I am sure he views his neighbors on Fairmount as suckers.

The saddest thing about this is that by not paying your taxes you lower your own property value and make your properties less rentable.

[CLAUDE G]

I just did something simmilar with a car my friend recently got a repo order on.

My Friend was 3 months behind in payments, due to some financial issues at work. The car was worth far less than what was owed, so the manager at the credit union just refused to work with him. Ballance was $6,500

The car was in such bad shape, I ended up buying it in an auction for $1000.

So now my friend owes the credit union the ballance of $5,500, but he now has his car back with a clean title.

Now the question is if and when is the credit union going to hit him with a lawsuit.

[HistoryNotHisStory]

... His business model is to make you cover his business costs while he gets the profit.

And what is wrong with that.
That is the business model of every corporation and small business in America. ENtreprenaurs are in business to make a profit and not a loss.

THat is the difference between charity and a business.

[internet_pseudopod]

And what is wrong with that.
That is the business model of every corporation and small business in America. ENtreprenaurs are in business to make a profit and not a loss.

THat is the difference between charity and a business.

I can't fault him as a business man. He exploited an easily exploitable loophole that shouldn't even exist. That's fair. But ol' Jeff wants to pretend that he is a innocent victim of oppressive taxes. He isn't. He bought a house in a high tax area with a unpaid water bill on it with the intention of ridding himself of those debts via this loophole. If you are on Detroit water next time your rates get raised send a thank you note to Jeffrey.

[lukabottle]

http://detnews.com/article/20110913/...losure-resales

Counties can ban owners from foreclosure resales

But Wayne officials say they don't want to prohibit practice

Christine MacDonald/ The Detroit News

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


From The Detroit News: http://detnews.com/article/20110913/...#ixzz1XqqRAQnq

[davewindsor]

At the September auction, the properties' prices are the debt that's owed. But in October, the county treasurer sells off whatever is left at a $500 opening bid.
While Wayne County doesn't want to stop the method, Macomb County Treasurer Ted Wahby said he plans to officially ban the practice this fall.

When and where do these September and October listings get posted? I googled http://www.waynecounty.com/WCAuction...p?DollarMode=N But, it says there are currently no listings.

[pkbroch]

Wayne County is using a company called Bib4Assets to handle their tax auctions.

The next auctions are in the middle of September, next week. The amount of properties listed is mind blowing. Checking by zip code is the easiest.

http://www.bid4assets.com/storefront/index.cfm?sfID=602