On Wednesday, May 2, 2012, I went to the Judicial Tax Sale held by Monroe County, PA. As an investor and 3rd party bidder, I went with the intention of picking up properties for much less than current market value. I had not been to this particular auction since 2007, when after moving to the county in 2006, I discovered that the state I moved to was a tax deed state. Before that I lived in New York City, where tax liens are issued against property and then go through the foreclosure process if the liens are not paid. In Pennsylvania if someone does not pay their property taxes for two years, their property is then sold at auction to the highest bidder. I did not have high expectations on winning properties that I had my eye on, but the hope was ever present.
At The Auction
I arrived at the Municipal Offices at 8:30am, with the auction set to start at 9am. Already there were at more than 40 people there. With all the seats filled, standing room was a luxury that wasn’t going to be available for long. I was waiting for two other gentlemen who had never attended a tax deed auction before and wanted to witness the experience firsthand. At 8:55, one of the representatives from the tax claim office came up to the podium and announced that the auction was going to start shortly and that according to state & county law, must read the by-laws regarding the auction process and make note of who from the county was present. After all formalities were done with, we were to begin. At that time, the room had swollen to about 70 people. Once the room got quiet at around 9:01, it was time to get down to business.
The first parcel up for bid was a 50 acre lot belonging to a gentleman that according to my research had passed away and the estate didn’t take care of the taxes. This was one of two lots (adjacent to each other) that were up for auction. I knew the starting bids, because that’s public record, but to hear that the starting price to buy 50 acres of land was $370 still makes me wonder. It took less than a second for the starting bid to be met. When I heard the word “sold”, the final price was $36,000 and the luxury home builder was the winner.
Some lots went next. One of the lots was a campsite. What made this sale interesting was that the original owner was bidding on his own property! No one knew until someone bidding against him called him out to the auctioneer. At that point, the auction was halted and the rules of the auction were read to the audience. Although the original owner was not allowed to purchase at the auction, there was nothing prohibiting him from bidding. The irony in all of this was that the owner had the winning bid! (I do not know how that worked out for him, as he and the person bidding against him met during the lunch break and had a conversation. It did not come up for rebid, so some agreement must have been made.)
Then the second lot adjacent to the 50 acres sold earlier came up for bid. Starting bid was $375 and did not stop until “sold” was announced at $38,000. The property’s combined current market value was around $190,000 and it was picked up for 60% off. Some people would call that a bargain, but this investor thinks otherwise.
Tax Sale Results
Watching the day progress, I observed that the houses were the most prized pieces at the auction, with the bidding getting hot and heavy. Some people got good deals, but in my opinion some bidders were taken to the cleaners because they wanted to just win. Here are some of the action results for properties with houses:
- * A 4bed, 2bth house valued around $46,000 sold for $598. There was no bidder action on this property because it needs around $30,000 in repairs.
- * A 3 bed, 3bth house valued around $124,000 sold for $190,000. The word in the room was that this house was in basic move in condition with very minimal repairs needed.
- * A 4bed, 4bth, 5000 sqft executive home valued around $307,000 sold for $101,000. This was one of the more interesting bids of the day as it appeared that two lawyers were aiming to outbid the other for this property.
- * A 3bed, 1bath house valued around $70,000 sold for $50,000. This parcel was bid heavily by investors and contractors. The word in the room was that the property was going to need around $30,000 in repairs to make it marketable.
Land sales were almost another thing entirely. I remember hearing the Tax Lien Lady explain that if one was going to purchase land, that it is best to have viewed it personally and do your homework. The parcels that were bought were definitely by bidders who knew what they wanted. Most bidders faced no competition. The ones that did only did so because they were the more experienced investors in the room and others believed that they were on to something and had to get in on the action. This is where you saw more heart than rationale with the bidding. At one point, one investor reminded another investor that one parcel had over $140,000 in Federal liens against the property. The investor bidding quickly withdrew his bid and thanked the other gentleman on the other side of the room. Of the around 500 lots available, only around 75 were sold.
About The Author
Shawn Hobbs is the owner of SJH Investments LLC a tax lien and tax deed investing agent that handles bidding for investors at tax deed and tax lien sales who either cannot physically bid at the tax sale themselves or who do not feel comfortable doing the necessary due diligence to make sure that they are bidding on profitable tax liens or tax deeds. You can find out more about his agency, SJH Investments, LLC by e-mailing him at SJHInvest@gmail.com.