Some towns NOT doing tax foreclosures. Post 139

Michael Rady worked at the docks for 15 years to pay off the mortgage on his Cleveland home.

But when Mr. Rady was injured and could no longer do physical labor, he couldn’t find a job and had to live off savings and credit cards. Soon, he owed Cuyahoga County close to $8,000 in property taxes, and the county treasurer sent him a foreclosure notice: His house would go to auction in February.

Nationwide, many counties and cities faced with declining revenues are turning to tax foreclosures – when a homeowner is evicted due to unpaid taxes rather than an unpaid mortgage. For the most part, local officials see tax foreclosures as a necessary evil. But in some cases, tax foreclosures appear to be spiraling out of control, threatening the health of cities. Cuyahoga County, for instance, has recently reversed course and imposed a moratorium on tax foreclosures for the first time since the Depression.

In pursuing tax foreclosures, “We’re lowering the prices [of homes] and contributing to wealth destruction,” says Treasurer Jim Rokakis.

It can be a wrenching decision. One Maine town is allowing delinquents to stay in their property penalty-free to avoid throwing people out of their homes. But, in many cases, local politics rules the day. Tax foreclosures are most common in municipalities where treasurers are appointed.

“If you’re elected, are you going to foreclose on people who voted for you?” says Kathleen O’Donnell, a tax-title attorney in Boston.

Historically, tax foreclosures rise when mortgage foreclosures do, says Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies. Typically, delinquent residents pay off back taxes by selling their house, but that can be hard in today’s housing market.

No one currently tracks tax foreclosures nationwide, though a new nonprofit called the Center for Land Reform in Flint, Mich., was started last year for that purpose.

Anecdotal evidence from across the United States suggests that tax foreclosures are rising.

Tax foreclosures are up in three-quarters of Washington State’s counties, says Bob Lothspeich, president of the Washington State Association of County Treasurers.

In Michigan’s Ingham County, where Lansing is located, the number of people who face tax foreclosure almost doubled, from 822 in 2008 to a record 1,506 in 2009, says Treasurer Eric Schertzing.

Shirley, Mass., reinstated tax foreclosures after cuts in state aid forced it to lay off more than half its firefighters and shift town employees to a four-day workweek. The last time Shirley made tax foreclosures was 50 years ago. Now, 130 taxpayers in a town of 7,904 owe more than $1.3 million in back taxes and interest, some going back to the 1950s, says Treasurer Kevin Johnston.

“We’re going broke,” adds Shirley selectman Enrico Cappucci, who supports tax foreclosures.

In most jurisdictions, people have several years between defaulting on their taxes and facing eviction. In Washington State, taxpayers have to be delinquent for three years. In Massachusetts and Michigan, it is approximately two years. The rules vary by state, county, or city.

Millinocket, in central Maine, does not evict anyone. The number of people who lost titles to their homes because they did not pay their taxes doubled or tripled in recent years, says Town Manager Gene Conlogue. But the town did not throw anyone out.

“We have a policy that requires them to pay rent, but we generally waive that,” Mr. Conlogue says. “We’re not trying to add to people’s problems.”

Neither is Mr. Schertzing of Michigan’s Ingham County. But tax foreclosures are necessary, he says. The best he can do is making it gentler than a mortgage foreclosure. “I go to some of these homes, I knock on the doors, and I talk to the families,” he says.

In Ohio’s Cuyahoga County, sheer numbers preclude that approach. The county prosecutor filed 2,000 tax-foreclosure cases in 2009 – a 400 percent increase from five years ago. Tax foreclosures in the county accounted for 13 percent of all foreclosures.

This year, the prosecutor expects to file some 2,400 cases.

But delinquent Cuyahoga County home-owner Rady and 160 other residents set to have their houses auctioned in February have gotten a temporary reprieve. Treasurer Mr. Rokakis instituted a six-month moratorium on tax foreclosures a few days before Christmas. “Adding more foreclosures to the thousands of properties that have already been foreclosed is not helping,”Rokakis says.

The decision made Rady, who lives on Social Security, feel “somewhat relieved.” He has to raise $8,677 in six months. “I don’t know how much I’ll be able to come up with,” he says. “I’m going to try.”


Coach Mitch’s REFLECTIONS™

Tax delinquencies abound

What does the proliferation of tax foreclosures mean for you? Well it is simple. Right now in 2010, you may want to look at towards investing in Tax Foreclosures. You can contact your local courthouse and get a list of delinquent properties that have not paid their property taxes on time as well as the date for the auction that these properties will go up for sale. You can bid against the others seeking a good deal at the auction OR you can use Coach Mitch’s “Ridiculously Simple System…”™ to contact these tax delinquents and do a deal with them well prior to the tax auction.

You are the “white knight”

I know it sounds incredulous to think that a homeowner would look forward to seeing someone who will try to pay little for their property, but such are the times we live in. From reading this article it should be apparent that the tax wolf is beating down the door and no one is offering to buy the property at regular prices.  That you are willing to come in and give the tax delinquent something, say 50¢ on the dollar, is much better than they will get from anyone else.  That is why you will be welcomed into the home and thought well of.  You are helping, where others are not helping.

Do things correctly

Remember, you are in the power position.  The tax delinquent is in the vulnerable position.  Approach the sale with tenderness, empathy, and intelligence.  You will be successful if you treat the tax delinquent with a caring attitude. Don’t forget, you didn’t cause the delinquency problem and the county is only making things worse. You are the only one trying to help. You need to be careful about how much you pay because you don’t want to be hurt in the process, which is very understandable.

See Coach Mitch’s “Ridiculously Simple System…” &#8284 for details.

Best of luck,

Mitchell Goldstein - Coach Mitch
518-439-6100 until midnight EST

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