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Wednesday, November 20, 2013
Buffalo's 2013 In-Rem Auction
Piece written by Derek King, an Architectural Historian in Buffalo, NY, and originally appeared on The Buffalo Exchange
It was clear as soon as I entered the Convention Center that Buffalo’s In-Rem was much bigger than I expected.
Two lines extended across the full length of the lobby, and all the tables in between were filled with individuals looking to purchase lots and buildings during the City’s 47th annual foreclosure auction of properties delinquent on their taxes. In line were city residents hoping to pick up something on their streets standing next to real estate investors from Toronto and New York. Men wearing kippahs stood behind women in hijabs, and scarf-wearing bakery owners eyed local developers and waved at neighbors.
Between the big diverse crowd, the high energy, and the future on everyone’s mind, it was a quintessential Buffalo event.
2013 In-Rem Auction 47
Buffalo’s In-Rem is an annual auction each October where attendees can bid on properties whose owners have not yet paid their taxes, or other bills related to the property such as water and user fees, making is slightly different than a standard mortgage-foreclosure auction. Many of these properties have been vacant for years; some of the lots auctioned, whose actual buildings were demolished years ago, have been on the In-Rem list for over the last 10 years..
For many, it may not be surprising to hear about these problems in Detroit, as their issues with vacancy and monumental debt are well documented in the national media. Fewer likely know , however, that Buffalo and many other Rust Belt cities face similar issues of vacancy and housing foreclosure. In 2010, during the last Census, Buffalo had almost 21,000 vacant homes within city limits, representing over 15% of the total housing stock. That number didn’t even account for the over 3,300 acres of vacant land in Buffalo. Though that number may have decreased slightly since then, it is still a very daunting number, especially considering the city only owns 4,000 of those vacant properties.
Each year, the In-Rem Auction attempts to get some of these vacant properties back on the tax roll. In 2012, over 3,100 properties went to auction, and a little over a third were sold. The remaining two-thirds were either sold to the city, or “adjourned.” Some attendees joked that adjourned was just another way of saying the delinquent owner got a free pass. Based on the number of vacant lots that have been repeatedly adjourned, the city has issued a lot of free passes over the years.
Once people filed into the main conference room, the real fun began. Attendees began discussing the different strategies they’d employed in scoping out certain properties, everything from cursory drive-bys to peeking in windows. Analysis of the real estate market in Buffalo, by amateurs and professionals alike, bounced back and forth. Some people were there looking for their first properties, others for investments. Some wanted vacant lots abutting their homes, others were tired of no one taking care of the house at the end of their street.
Right before the auction began, several rules and regulations were outlined for attendees, including: owners purchase properties as-is; anyone suspected of driving up bids or collaborating with others would be tossed out; and several people intoned about the city's commitment to prevent house-flipping. The Anti-Flipping Task Force noted, in particular, that houses had to be owned at least six-months, and could not be sold for over 120% of the buildings purchasing cost during that time. Individuals found in violation would be held accountable, and though a punishment wasn’t noted, the withering stare of the Task Force’s speaker, Joy McDuffie definitely drove home the fact that it would be serious.
Then it began.
The pacing was incredibly quick, as the auctioneer (and City Treasurer), Michael Seaman, stormed through vacant lots at a break-neck speed. He burned through the beginning of the list, which included many vacant lots that had been part of the auction for years. When he arrived at a building, he definitely demonstrated his skills as an auctioneer.
The early bids hinted that this was going to be an exciting few days. As Hawkeye Maps noted about last year’s auction, the average bid was around $7,000, with 50% of the properties sold under $3,000. This year, the average over the two days I attended was closer to $10,000. After several bids were over $120,000, there was even applause.
During a break, I asked local developer Bill Breezer if this was how it always was. “I started buying rental properties in the late 70s, and probably began coming to this in the 80s,” he told me, “but it’s definitely gotten much more popular over the last few years.”
Though events like the In-Rem Auction is exciting, the fact that thousands of Buffalo properties each year go up for auction is not an encouraging sign. Grouped with the vacancy issues noted above, as well as with a 40% ownership rate of occupied housing, the In-Rem is another sign of how far Buffalo has to go before it has anything resembling a stable real estate market. The popularity of the In-Rem, however, and the steady rise in auction prices, indicate that there may be something to substantiate the positivity many resident's have had concerning Buffalo's economy of late. For some, this is bittersweet. Young people in particular look at this year’s In-Rem as a last-chance opportunity to get affordable real estate before the market climbs out of their reach again. ”It’s bad,” said Bernice Radle, one of the co-owners of Buffalove Development, and one of the “young folks” at the auction at age 27, “but it’s bad in such a good way.”
One of the good features of higher prices is higher down payments by bidders. Anyone who purchases a property has to pay either the full price, or at least $500 (for vacant lots), $2,500 (for most buildings), or 10% of the sale price immediately on the premises with the full price paid by the first week of December if the winner sought to keep the property. If bid-winners have to put more down upfront, they’ll be less likely to walk away if the building requires more work than they’d like, and the building would be less likely to return to auction the next year.
Of course, higher bid-prices also meant that most buildings and lots were out of reach for local individuals looking to buy their first home or first investment property. After developers and investors, the next biggest demographic seemed to be young couples: the room seem filled of pairs, one of which frantically compared the most recent lists of properties to laptop databases they’d compiled, and during bids elbowed their spouses and partners as the prices went too high.
Looking over this years results, it turns out two of the bids I witnessed were the highest of the auction, both by Albert Burruano of Western New York Property Investors Inc. Only one other bid went over $100,000, but the average bid for a house was around $20,000. A quick scan through the final results will drive home the diversity of attendees bidding in the Auction Hall, and the final bids underscore the optimism about Buffalo's future. Still, the fact that the event exists at all demonstrates the bitter reality that Buffalo faces when it comes to vacant and foreclosed land. Despite the higher bids, the sheer number of properties “struck to the City,” or "adjourned" for another year really does show just how much further Buffalo has to go.