Tax sale season is approaching, and in three weeks or so, Citizens Square will be filled with people bidding on hundreds, if not thousands, of properties that have fallen behind on their property taxes.
If youve never been to a tax sale, it can be mind-numbingly dull waiting for particular properties, listed by number and not by address, to come up for a bid.
And if youre interested in bidding on a property, thinking you can buy a home for a couple of thousand dollars, other bidders can make you feel awfully small. Many of the people who show up have a seemingly endless supply of money to buy properties.
The fact is, though, that few people who show up at these tax sales have any interest in owning a house or piece of real estate. Their hope is that whoever owns the property will decide they dont want some stranger to end up getting it for a fraction of its value and come forward and pay their taxes – plus 10 percent interest on what the bidder offered at the auction. The interest goes to the bidder.
If a property owner takes more than six months to come forward, that interest rate jumps to 15 percent.
So lets say someone offers $20,000 for a $60,000 house at the tax sale. Theyre betting the owner will come forward and pay that $2,000 in interest to keep the house, or $3,000 if more than six months have passed.
At a time when 10-year Treasury notes are paying only 2.9 percent and mortgage rates are still only about 4 percent – still close to rock bottom, as far as Im concerned – thats a pretty good return on your money.
It can be exciting, I suppose, to bid on tax sale properties. Ive never done it. I dont have any money.
But this year there are some particularly interesting properties up for auction. Among them are five properties along Dawkins Road in New Haven listed for a few hundred dollars each. And the owner is: the United States of America.
Gad, you think, the United States government is a deadbeat. It hasnt paid its property taxes, which, by the way, total only about $3,000 in total.
Somebodys head is gonna roll, you think, when the government finds that some yokel has bought federal property for a pittance, and the government is going to have to pay more than three times its going interest rate to get the property back.
Think again. Its not that unusual for federal property to end up in tax sales. Federal property is actually exempt from local property taxes, Auditor Tera Klutz said, so those taxes might actually be drainage assessments.
The property on Dawkins Road is part of the old Defense Logistics Agency property in New Haven, where the federal government used to store things like huge amounts of mercury, which is fun to play with but not good for you.
Got a hankering to buy it? Dont bother to try. Though the unpaid assessments are technically on the books, the property wont be for sale the day of the auction. Do you really think you could try to bully the federal government out of some land or money, anyway?