NEW ORLEANS – Auction Process Raises Nearly $3.7 Million So Far; Next Auction Scheduled for Aug. 5
The first in a series of monthly auctions for adjudicated properties in New Orleans brought in more than $2.5 million after 318 people placed more than 8,000 bids to buy 79 properties in what City officials are calling a “resounding success.” In addition, more than 44 delinquent accounts of $1,170,326 were paid in full in the weeks leading up to the auction. Altogether, the adjudicated property auction process has so far brought in nearly $3.7 million for the City of New Orleans and is helping to revive economic activity and create a fairer tax system. The next auction will be held Aug. 5, 2015, where 190 properties are currently scheduled for sale.
“The City’s first-ever online adjudicated property auction was a resounding success,” said Mayor Mitch Landrieu. “This process will do more than put these properties back into commerce, it will also help strengthen our communities and collect important revenue for the City to invest in residents’ priorities, such as community revitalization, public safety, street repairs and parks and recreation. This auction is just the latest example of the renewed spirit of investment we’re seeing here in New Orleans, from former residents coming back home to buy properties in their old neighborhoods to world-renown companies like the Four Seasons coming to downtown. These investments, along with the City’s affordable housing plans, will ensure we continue the growth and progress we’re seeing since Katrina and that every resident shares in that prosperity.”
Councilmember-At-Large Stacy Head said, “Seventy-nine properties that have been blighted, a burden on the City, and shifted property tax obligation to those taxpayers who pay their debts, are now back in commerce. While the initial revenue generation for the City and other taxing bodies is wonderful, the real benefit is in years to come as these properties become homes for New Orleanians and continue to stabilize neighborhoods.”
A property is adjudicated to the City when its property taxes have not been paid – becoming delinquent – and the City is unable sell the property at a tax sale. The City only auctions properties where five years have elapsed from the tax sale certificate filing date. The average length of delinquent accounts for the City’s adjudicated properties is 22 years.
In the July 1 auction, 65 people bought 79 properties for a cumulative total of $2,528,805 (more than 85 percent of the winning bidders were from Louisiana). The highest bid in the auction was $330,000 for a commercial building at 2438 St. Claude Ave. There were more than 9,850 due process notifications mailed for the July sale and yard signs were placed on each property before the auction as part of the extensive efforts to contact and alert property owners. The properties scheduled for auction in July had an accumulated debt of $2,514,248.32, which included back taxes, penalties and interest. The revenue will be used to cover the cost of the sale and pay back the taxes owed to the appropriate entities, such as the City of New Orleans, Board of Liquidation, Orleans Parish School Board and Sewerage & Water Board. All remaining revenue will go to the City of New Orleans, where it can be used to invest in key resident priorities, such as community revitalization, public safety, street repairs and parks and recreation.
“This auction represents a great moment for the City and taxpayers,” said First Deputy Mayor & CAO Andy Kopplin. “When a small, select group of taxpayers don’t pay their taxes, it’s not fair to the vast majority of law-abiding taxpayers who are forced to pick up the slack and pay more than their fair share. This auction has helped bring delinquent taxpayers into compliance and bring properties throughout the city back into commerce. These auctions will also spur residential development to help relieve the pressure of the housing market, driving down the cost of buying and renting in New Orleans. We look forward to continuing these monthly auctions until the City has exhausted its backlog of adjudicated properties.”
According to State law, the original property owner(s) have until the closing of the real estate transaction to pay the taxes owed and retain the property. If they do so, the winning bidder and depositors would be fully refunded their money. Once the property is successfully sold to the winning bidder, all adjudicated property owners, as well as those who have a recorded interest in a delinquent property, forfeit all rights to the property.
The City will hold the online auctions for adjudicated properties on the first Wednesday of every month, from 8:00 a.m. to 8:00 p.m., subject to a rolling close in the case of last-minute competitive bidding. The City is scheduled to sell about 190 properties on Aug. 5 and 171 properties on Sept. 2. The number of properties could change as delinquent property owners pay the taxes and fees due.
Earlier this year, the City made 1,786 adjudicated properties available for sale through auction, more than 90 percent of which were vacant lots and more than 80 percent had been adjudicated to the City for longer than 10 years. Since then, more than 635 properties have had deposits placed, moving these properties into the research and notification phase. More than 75 percent of the depositors live in Louisiana. As properties clear the research and notification phase – and after they have been certified for insurability – they are scheduled for auction on a monthly basis.
Any interested party may bid on the property, whether or not they placed the initial deposit on the property (depositors who lose at auction will have their deposit refunded). The minimum starting price will include the cost of the research and legal notifications, closing costs and the cost of the title insurance, which can range from $3,000 to $7,000 depending on the property. Unlike tax sales, the successful purchaser at an adjudicated property auction will own the property free and clear with title insurance underwritten by WFG National Title Insurance Company. A list of the properties for auction is available at CivicSource.com, which is also where the online auctions take place.
A key goal of the adjudicated property auction is to provide title insurance to the winning bidder through WFG National Title Insurance Company. In order to undertake the legal research to be able to offer an Owner’s Title Insurance Policy, each property has undergone a two-step process:
STEP ONE: THE PRE-SALE RESEARCH & NOTICE PROCESS
When an investor chooses to initiate the auction process on one or more properties, he or she will place a deposit of $650 on each property, which starts the prerequisite legal research and notification process that is required before the auction takes place. The pre-sale process takes approximately 120 days to complete. If, during pre-sale period, the current property owner pays all delinquent taxes and fees, the depositor is refunded the deposit and the sale is halted.
STEP TWO: THE AUCTION
If the property is not redeemed by the conclusion of the research and notification period, a WFG National Title Insurance Company authorized agent reviews the file for total compliance with WFG’s prescribed underwriting guidelines. Properties that do not meet the guidelines remain in the research and notification processing stage until it is deemed either insurable or uninsurable within those guidelines. In the case of the latter, the property is excluded and the depositor is refunded; for properties that meet the guidelines, the auction date is set and the depositors are notified. When the auction goes live, the depositors and other interest parties place their bids and a regular online auction takes place (bidders do not have to place a deposit in order to bid, but a deposit is required to initiate the research and notification process that must occur before an auction can take place). The minimum starting price for each property includes the cost of the research and legal notifications, closing costs and the cost of the title insurance. Unlike online tax sales, the successful purchaser will own the property free and clear with title insurance guaranteed through WFG National Title Insurance Company. Losing depositors will be refunded their $650 deposit.
Questions about delinquent taxes and the adjudicated property sale process should be directed to Department of Finance’s Bureau of Treasury by calling toll free 1-888-387-8027.
VIA http://www.nola.gov/mayor/press-releases/2015/20150702-pr-auction-update/
