The District is holding an auction to unload unwanted properties with delinquent property tax bills — only this auction looks more like a red tag sale. The city has tried to unload these properties twice before, but there were few bidders or bids compared with the years of the real estate boom. So this month the District is offering a major discount on deed taxes and is starting bids at $300 — no matter how much is actually owed in back taxes by the property owner. A total of $10.2 million is owed on 353 delinquent properties, some of which owe more than $200,000 in taxes.
Bidders at the auction, which will be held March 14, will be bidding on the tax lien held by the city. Buying a lien is generally viewed as an investment, said Tobin, O’Connor & Ewing real estate lawyer John E. Reid. The city gets paid the money it’s owned, property owners eventually pay back their taxes, and the new lien holder gets to keep the interest.
But D.C. had trouble selling off liens in last year’s annual tax auction and also at a special auction that was held in December that featured nearly 1,200 properties totaling more than $20 million in back taxes.
The lack of interest is largely because the real estate market has all but stalled and the remaining delinquent properties aren’t attractive investments, Reid said.
“This sale, a lot of the properties are lots in the eastern portion of the city that aren’t economically viable. The taxes accrued may be more than the property’s worth or it may not be a buildable lot,” he said. “So the only way to make it attractive to a bidder is to sell them for less than is owed.”
And although the city probably won’t be receiving all the property taxes it is owed, something is better than nothing, he added.
If property owners don’t pay back the new lien holder, the holder can foreclose on the property. But that’s rare — experts say that happens roughly 5 percent of the time.
The largest single bill belongs to the J. Finley Wilson Memorial Lodge, a fraternal lodge in Southeast D.C. that owes more than $295,000. Marshall Heights Community Development Organization Inc., a nonprofit based in Ward 7, owes more than $285,000 for six properties combined.
