Bill to Eliminate Requirement of Two Auctions for Foreclosed Properties Receives Hearing

Posted on September 13, 2012 by Dene Westbrook

The House Local Government Committee today took testimony on HB 4819 (Ananich). This bill deals with foreclosed properties that are sold at auction, and attempts to address the problem associated with the so-called scavenger auction. According to state law, there must be at least two auctions by the county. The first auction has a minimum bid starting at the price of paying back the taxes owed, liens, fees, interest, etc. The second required auction does not have these minimum bid requirements and has properties sold for the lowest bid made. Several communities have had problems with properties purchased very cheap at the second auction then held in hopes of future profit being made (speculating). Also, the testimony was that some companies buy up the properties and re-sell them on ebay to unsuspecting buyers. In most cases, the properties stay vacant, become blighted, and are a risk for damage or arson or other problems.

HB 4819 proposes to allow individual counties to eliminate the second auction if they choose. It allows for “one or more” property sales. If they choose to hold a second auction, minimum bids would not be required.  The Genesee County Treasurer testified in support, and the County Treasurers Association indicated support. The Department of Treasury also testified in support saying that the system now is not free-market because there is collusion going on to not buy properties at the first auction and have all interested parties wait until the second auction. This could help alleviate that problem.  The Realtors testified with concerns but supportive. They said that the second auction is the actual market value, but that they are willing to work on this to ensure there is appropriate criteria and transparency for the auction.

The League did not weigh in at this point. While this legislation primarily deals with counties, the scavenger auction has an effect on local units of government and communities so the League will look at weighing in at the next hearing. The bill did not receive a vote.

Nikki Brown is the Capital Office Coordinator for the League handling economic development related issues.  She can be reached at [email protected] or 517-908-0305.

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