The auction will be the first such sale in Tennessee online and it will be the first tax sale with shorter redemption periods for some of the property, depending on how far behind the original owner is on their property taxes.
Shelby County Trustee David Lenoir, who oversees the quarterly tax sales, came to recognize the point at which those buying property at the auctions realized their winning bid would have to wait a year on the original owner.
“He or she could come back at any point in that one year and redeem the property,” Lenoir explained. “I could see the body language of the attendees just slump over. ‘I’ve basically got some dead money for a year because I’m in limbo.’”
Lenoir talked about the coming auction Thursday, Jan. 7, at a Real Estate Roadshow at the Memphis Botanic Gardens cosponsored by Chandler Reports, the real estate information company that is a division of The Daily News Publishing Co.
The event, which was a preview of the auction and an opportunity for questions and feedback from potential bidders, drew more than 300 people.
The new redemption period is based on how many years in back taxes the original property owner owes.
If it is eight years or more, the redemption period is 90 days; it’s 180 days if they are 5-7 years behind; and the one-year redemption period still applies on property behind in taxes by less than five years.
For property that is determined to be “vacant and abandoned,” the redemption period is 30 days.
But Lenoir cautioned that local government leaders haven’t yet worked out who would do the inspections to make that determination.
Tennessee Gov. Bill Haslam signed the new redemption period into law this past summer.
The online auction is over three days and is being run by CivicSource.com, an online auction company based in New Orleans that was chosen through a county government request for proposal.
Through its web site, registered bidders can see the property on a map including vacant lots that are often listed without a house number.
They can bid remotely through CivicSource. The Trustee’s office also will have computer terminals available at the Vasco Smith County Administration Building.
Brian Danos, CivicSource COO, explained that buyers cannot have delinquent taxes, cannot be county government employees and must have a bank account.
The online site includes a “proxy bid” feature that allows a bidder to set a maximum amount they are willing to pay and the software will continue to go one-dollar higher than a current high bid until it hits the limit.
That allows online bidders to set the feature for several properties at once. They see rival bids but not the identity of the bidders.
All of the auction sales also come with a “sliding close” feature. A last bid, even if it is at the very end of the auction, must stand unanswered online for five minutes to be final.
If a bid is made within five minutes of 8 p.m. on Jan. 21, the closing time on the last day of the auction sale, bidding is automatically extended five minutes for any further bids.
If there is another bid in that five minutes, bidding is again extended.
“Sometimes this means things go on for a long time,” Danos said.
Lenoir was asked about out-of-town investors and landlords buying up large numbers of the tax properties and letting them deteriorate, adding to an already stubborn blight problem in Shelby County.
Lenoir said there are “good and bad” landlords and buyers who are local as well as out-of-town.
“When large hedge funds come in and buy big lots of properties long-term that could potentially be a problem because they are not necessarily buying it from a community development standpoint,” he said. “They are buying it from an investment standpoint.”
But Lenoir said he doesn’t think more hoops for buyers to jump through is necessarily an effective solution.
“I’m willing to listen to any practical, well thought-out solution for addressing the problem,” he said. “If someone wants to circumvent the system and put their property in a local buyer’s name just to solve that problem and then sell it 60 days later to an out-of-towner, you’re not going to police that.”
-The Daily News