What is the program?
Several years ago now, the Southwest Partnership realized that the traditional tax sale system was not a helpful tool to reduce vacancy in our neighborhoods. More often than not, vacant and abandoned properties were being bought up by speculators and investors through a process that only cared if they had money to pay the back taxes, but not whether they had the experience to rehabilitate the property. As a result, hundreds of properties are stuck in an endless loop of tax sale, when the new owners realize that the costs to rehab often exceed what they can resell the property for. And therefore they either sit on the property, waiting for the market to appreciate, walk away from it themselves, or do very poor rehab jobs that allows them to prey on low-income tenants.
As a result, SWP approached the City to create a new approach, whereby SWP would vet the developers and ensure an emphasis on homeownership, if the City would reserve the tax sale properties in our footprint for us to have the first right of purchase. Like any new process, there will be mistakes made, but that’s why we need your engagement at every step to ensure that the next round is better.
WHAT IS TAX SALE?
Tax sale is a process used by local governments like Baltimore City to collect money from property owners who are behind on their property taxes and water bills. If an owner is behind by at least $250 ($750 in Baltimore City) on their taxes, those taxes become a lien on the property. A lien is a debt that is attached to a property, like a mortgage.
Every year, Baltimore City holds a “tax sale” auction. At the auction, the City can sell the lien against a property to an investor who bids on it. If the City is going to sell your tax lien, they have to send you a notice and publish this information in the newspaper before the tax sale.
HOW IS OUR PROCESS DIFFERENT?
Our tax sale properties never go to individual auction in May, but are reserved for “community development purposes” in the October bulk tax sale auction. Our properties are almost always vacant, uninhabitable properties, as our mission is to fight blight in our communities. Instead of auctioning off these properties to the highest bidder, we have a first-come-first-serve policy that vets all applicants based generally on their experience rehabbing uninhabitable rowhomes, financial ability to do so, and willingness to try to sell the rehabbed property for homeownership.
If the applicant is approved, the Southwest Partnership manages the entire tax sale certificate purchase and foreclosure process on behalf of the applicant, and depending on the property, provide subsidy either in acquisition of the tax sale certificate or in stabilization of the property after receiving free and clear title.
HOW LONG ARE PROPERTIES AVAILABLE?
Generally, all tax sale certificates are valid for two years from the date of the auction. In this case, the date of the auction is the October bulk sale auction.
Our tax sale properties are first-come-first-serve. Since it is the Comptroller’s Department of Real Estate that reserves these certificates, they may from time to time approach us with an applicant. If we do not have a buyer already committed to the property, we may be asked to vet and consider the applicant that they present to us.
DO I HAVE TO SELL FOR HOMEOWNERSHIP?
All approved applicants agree to try to sell their rehabbed property on the market for homeownership for at least 90 days, before selling it for homeownership or rental. We understand that each property is unique and that in transitional markets the cost to rehab often exceed resale values. Nonetheless, Southwest Partnership represents a coalition of seven neighborhoods that have requested we emphasize homeownership to improve neighborhood stability. Any exceptions, will be evaluated on a case-by-case basis that includes factors such as the property location, square footage, condition, homeownership rate of the surrounding neighborhood and neighborhood approval.
Please note that we will be looking into ways to market all tax sale properties at upcoming events, and support efforts to reduce “holding costs” during foreclosure and sale.
WHAT IF THE NUMBERS DON’T ADD UP EVEN AFTER LIEN REDUCTION?
To receive a lien reduction, the lien amount must exceed the assessed value of the property, but sometimes the assessed value does not accurately reflect the present market value of the property. When this happens, you do have the right to get an independent appraisal, by a licensed appraiser. Since you will not have legal access to the property, a “windshield” appraisal from based on outside evaluation would suffice. Please notify the Southwest Partnership to coordinate this effort to determine if it is appropriate in your case.
HOW LONG DOES THE PROCESS TAKE?
From tax certificate purchase to free and clear title it can take up to 18 months. Most of this is due to the legal process through the Court system. Feel free to review the details of this process on the City’s Bid Baltimore website linked here for your convenience.
WHAT IS “REDEMPTION” AND WHAT HAPPENS IF MY TAX SALE CERTIFICATE GETS REDEEMED?
In brief, the original property owner can purchase back or “redeem” their property from whomever bought their certificate up until you file a Complaint to Foreclose the Right of Redemption in Court. For properties that were previously used for rental, you can file that Complaint within 6 months of the auction date on the certificate (not the date you buy it through the Southwest Partnership), whereas former homeowner properties can be filed after 9 months. The original property owner is obligated to repay the tax certificate purchaser the full cost of the lien plus interest and any other eligible costs determined by the Courts. Nuances on what determines eligible costs can be found on the City’s Bid Baltimore website linked here for your convenience.
Please note: Any interest accrued after the certificate is bought by Southwest Partnership (SWP) will be split between the applicant for the property and SWP.
WHAT IF THE BUILDING NEEDS URGENT REPAIR BEFORE I LEGALLY OWN IT?
In some cases the properties we deal with are in urgent need of repair and cannot wait for an 18-month legal process to be stabilized. In these cases, the approved applicant can purchase the tax sale certificate, and then after 60 days from purchase apply for a Certificate of Substantial repair through the City’s Department of Housing & Urban Development. This costs $100 and pays for a Housing Inspector to review the property and determine that your request is valid. If they decide in your favor, you present your proposed stabilization repairs to a judge, who will approve the costs and allow you to make the repairs despite not yet owning the property. NOTE: depending on how quickly the Courts schedule you to hear your stabilization proposal, it may take 3-6 months from the date you purchase the tax sale certificate to when you can start stabilization. Any stabilization you do before a judge approves would be illegal, and not eligible for reimbursement should the property be redeemed by the original property owner.
WHERE CAN I LEARN MORE ABOUT THE LEGAL FORECLOSURE PROCESS?
Beyond the application process to purchase a tax sale certificate, the rest of the process to foreclose on the property is well-regulated by law and explained in better detail on the City’s Bid Baltimore website linked here for your convenience.
WHAT IF I NEED TO REDEEM MY PROPERTY?
While our program is about purchasing tax sale certificates, we understand that some may need help redeeming their property from tax sale.
To save your property contact
- Check to make sure your property is on the tax sale list. You can check this by going directly to Bid Baltimore (https://www.bidbaltimore.com) and clicking on “Advertised List.” In the drop down box on the upper left side of the page, choose “Property Address,” then enter the property address and click Search.
- Contact the City for follow-up questions and to arrange payment:
Baltimore City Bureau of Revenue Collections