As COVID-19 ravaged the world, the Commissioner of State Lands Office was forced to cancel public auctions in 2020. But it still sold thousands of parcels of tax-delinquent land last year.
And thousands of parcels are still available for buyers outside the public auction process.
How does that happen?
When property is certified to the office for delinquent real estate taxes, it remains for two years unless is it redeemed by the owner, or someone on behalf of the owner, paying the delinquent taxes. This removes the property from the office and puts it back into tax-current status at the county collector’s office.
Property that isn’t redeemed in that two-year period is offered at public auction. COSL typically sells between 1,000 and 1,400 parcels during each year’s auction season. But that leaves hundreds – or even thousands – of parcels unsold.
The office has changed how it disposes of those unsold properties. On July 1, it began conducting online auctions of post-auction parcels.
Thirty days after a county’s auction, properties that failed to sell at auction appear on the post-auction sales list (auction.cosl.org). Bidding begins at the amount of taxes, penalties and interest owed on the land. The auction for an individual parcel begins when someone places a bid on that parcel.
The online bidding period continues for 30 days. Anyone can browse or research parcels offered in the online sale, but bidders must create an online account and register a valid credit or debit card. The online auctions are only open to U.S. residents.
Visitors to the auction site may see many parcels for which bidding begins at $50. These are parcels that have been on the post-auction sales list for more than two years, which were previously called “negotiated sales.” In the past, COSL would consider a reasonable offer lower than the amount due, if it was determined to be in the best interest of the state and county. When the office began online auctions, it determined $50 to be a reasonable beginning point for those parcels.
At the end of a parcel’s 30-day auction period, the office notifies the winning bidder via email. The first $100 of a purchase is charged to the bidder’s registered credit or debit card. Any balance may be paid online, or via certified funds. The balance must be paid within 10 business days.
The office also notifies the owner that the property has sold. The owner has 10 business days to redeem the property by paying the delinquent taxes. If the property is not redeemed, a limited warranty deed to the buyer is issued.
In 2020, the office sold 5,481 parcels from the post-auction list, totaling over $815,000. This was the highest number of post-auction sales in over a decade. And in the first half of this year, 5,459 parcels sold – indicating it will far exceed last year’s sales.
In 2004-05, buyers snatched up more than 20,000 properties from the post-auction list. That’s the highest two-year period recorded.
Post-auction sales generate less money than public auctions, but sell up to four times the number of parcels. In 2019, COSL office sold 1,355 parcels at auction for $5.36 million. In comparison, the 3,860 post-auction parcels that year brought in just $890,719. But the combined sales got more than 5,000 properties back into active status, generating tax revenue for counties: funds for schools, libraries, roads and emergency services.
Post-auction sales can be great for buyers, but they should be sure to be informed. The auction page of the website (auction.cosl.org) has several resources, including demonstration videos for researching property as well as the registration and bidding process.
Bidders will also find links to the statutes, rules and regulations that govern the process, and the buyer’s guide with an overview of the sales process.
The office always recommends that potential buyers do “due diligence” before bidding on a parcel. That applies to post-auction sales, too.
Bidders can begin researching online through the COSL website, but that won’t uncover everything.
The most effective way to do this is by purchasing a title search, which COSL indicates is a small investment to make sure you’re not walking into a property burdened with liens, clouded title and other potential legal issues.
The office recommends viewing the property. Don’t trespass or break into a building! But drive by to make sure that it’s where and what you’re really interested in buying. Bidders might decide it’s a fixer-upper with great DIY potential – or might consider it a money pit that should be avoided.
Remember that COSL is issuing a limited warranty deed.
That means there is no guarantee that the title is clear or marketable.
After receiving the limited warranty deed, and after the litigation period ends, it is recommend that buyers take legal action to quiet the title before spending significant money to develop or rehabilitate a property.
The annual live auctions will continue into November; the schedule can be found online at https://www.cosl.org/Home/Contents.