In Detroit's property tax foreclosure crisis, turning the losers into winners
Wayne County auctions off tens of thousands of tax-foreclosed properties every year.
The county’s latest annual property auction wrapped up last week.
It’s a major event for budding Detroit real estate investors. Yet their wins can also be devastating losses for people living in those homes.
That's why a growing movement is trying to help some of them become winners, too.
“Even when it works, it does not feel right”
Michigan state law requires county treasurers to auction off all properties that are tax-delinquent after three years.
That law dates back to 1999.
Back then, the idea that one county would auction off tens of thousands of properties every year seemed crazy.
And that anyone with an internet connection could bid, and snap up properties for as little as $500? Unimaginable.
But that’s exactly the situation we have now in Wayne County. As the auction was winding down last week, Michele Oberholtzer monitored the action on her laptop from a midtown Detroit office space.
“Yeah, we have two [properties] in seven minutes that should be closing. Oh gosh, the bidding went up,” said Oberholtzer with a sigh.
Oberholtzer founded the non-profit Tricycle Collective. Their mission is to help families who stand to lose their homes in this auction.
One way to do that: by turning those families into bidders themselves.
More than 28,000 foreclosed properties went to auction this year, the vast majority of them in Detroit. They included roughly 8,000 occupied homes.
The Tricycle Collective raised $20,000 to help 30 families try and stay in their homes.
Oberholtzer says it feels great to win, and to make that phone call letting a family know they can keep their home.
But she still believes this whole process "may be legal - but it's not fair."
“Even when it works, it does not feel right,” she says.
“People are losing their homes by the thousands, for small sums of money based on questionable tax assessments, and are not being made aware of their options,” Oberholtzer says.
Still, in the meantime, they can try to work the system so those people at least have a shot. Oberholtzer consults a spreadsheet on her laptop, updating from the auction website from a watch list of properties she’s following.
The Tricycle Collective canvassed 400 homes in Detroit to make sure residents did know their options.
This year, a change to state law prevented tax-delinquent homeowners from bidding to win back their homes. So the Collective targeted renters.
"People are losing their homes by the thousands, for small sums of money based on questionable tax assessments, and are not being made aware of their options." --Michele Oberholtzer, Tricycle Collective founder.
Oberholtzer says almost none of them knew anything about the foreclosure and auction process.
“Even just knowing about the foreclosure in the first place is a huge obstacle,” she says. “Knowing about the auction and one’s ability to participate in the first place is a huge obstacle.”
From crisis mode to “hope and options”
Crystal Fischer was an exception, though.
“I was outside cleaning, and they came to my door and gave me hope and options,” says Fischer, standing on her front porch in Detroit’s Brightmoor neighborhood. “Because literally, in two weeks I was moving.”
Fischer had been renting this house. Now, thanks to the auction, she owns it.
Her winning bid: the minimum $500—same as her monthly rent.
“So now I can fix it up, I can do whatever I want,” says Fischer, a friendly and exuberant 36-year-old. “Yay, yay, yay!”
Fischer says this turn of events is nothing short of a miracle. Because just a couple weeks ago, she was in a really bad spot.
Fischer had been getting foreclosure notices for months, and her landlord kept assuring her he would fix things.
But Fischer was suspicious, and eventually started doing some research. She found out that “landlord” didn’t own the house at all. And after she confronted him, he disappeared.
So Fischer tried to come up with a plan. She even found out about the auction, and considered buying the house. But she thought she would have to pay off all the back taxes—$18,000 worth.
That wasn’t going to work. “If I buy a house, it’s not going to be this neighborhood for that price,” Fischer says.
But Fischer didn’t know about the second round, where bidding starts at five hundred dollars, plus the cost of summer taxes. Until Michele Obertholtzer came to her door.
“I made that money order out the next day,” Fischer says. “I said ‘Oh, that’s all? I’m going.’ And I signed up.”
And it paid off.
“So you figure, I’m a single parent with two kids. And I don’t want to rent forever…but now I gotta save, the kids need school clothes, I gotta do this, that. This left me with options,” Fischer says.
Fischer's house is one of 18 homes the Tricycle Collective won at auction.
They’re not the only ones in Detroit doing this kind of work. All told, groups working with the United Community Housing Coalition raised funds for more than 300 families to bid on their current homes this year.
Of those, 167 won.
The people working in the thick of Detroit’s tax foreclosure cycle realize this strategy this doesn’t solve any of the system’s bigger problems, or even put much of a dent in the immediate foreclosure crisis.
But it gives a few families like Crystal Fischer’s a new sense of security, and more control over their future. And that makes a big difference to them.