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Earl Jones went from homeless to homeowner three years ago, buying a tax-foreclosed house for $500 on Detroit’s east side that nobody wanted.

The 64-year-old added plumbing, fixed the roof and secured a grant to buy a furnace and hot water heater. He could lose it all this spring over a $4,500 tax bill Jones probably never had to pay.

Jones didn’t know he qualifies for a poverty exemption that waives property taxes, and the city has valued the house at 44 times its purchase price. If Wayne County forecloses, Jones predicts the bungalow will become another vacant shell like so many homes on his block on East State Fair.

“As soon as you move out around here, they strip it the same day,” he said.

Wayne County will soon get its first new treasurer in 39 years, and advocates for the poor say that’s a unique opportunity to reform a foreclosure auction process that’s forced people from their homes, while allowing investors to buy land in bulk without paying taxes. In the past 10 years, the office has processed 110,000 foreclosures countywide.

“This is the equivalent of a natural disaster and people’s lives are in play,” said Wayne State University Law professor Peter Hammer, who is also director of the Damon J. Keith Center for Civil Rights at Wayne State. “You have to have a radical new approach.”

The two-month online auction ends Thursday, the day a committee of elected officials will begin considering eight candidates to succeed Treasurer Raymond J. Wojtowicz, who will retire Dec. 1. The appointee will run the department until the November 2016 election and could have an advantage with voters in the heavily Democratic county.

“Anybody who gets the interim has the inside track,” Hammer said.

Hammer and other critics say too many residents lose their homes because of inflated city tax assessments and because they didn’t know about homestead and poverty exemptions that could lower or eliminate bills. The critics want state law changed so bills can retroactively be lowered if a homeowner could have qualified for an exemption, which is not possible now.

Auction buyers also aren’t paying their taxes. The auction sells property with at least three years of unpaid taxes, but 69 percent of the 16,500 Detroit properties bought at the 2013 and 2014 auctions were delinquent as of late last month, The Detroit News found in collaboration with Loveland Technologies, a Detroit data company.

This year’s auction of 28,000 properties set a record. To soften the impact on residents, Wojtowicz teamed with Mayor Mike Duggan to push a series of statewide reforms. Among other things, new laws lowered interest on debt from 18 to 6 percent for many homeowners. Others had their taxes capped at a quarter of the market value of the home.

Still, as many as 8,000 occupied homes were up for sale, most of which are in Detroit.

“They have been very much trying to change how they are doing things for the better, but the scale is daunting in Detroit,” said Margaret Dewar, a University of Michigan professor of urban and regional planning who has studied the auction for years.

Hammer said the office should stop auctioning occupied homes, but treasury officials say their hands are tied.

“State law won’t allow it,” said Deputy Treasurer Eric Sabree, adding that officials have worked hard to arrange payment plans for delinquent homeowners.

For years, county officials ignored state law and didn’t foreclose on properties with tax bills of about $1,500 per year. That practice ended this year, leading in part to the record number of foreclosures.

Applying to succeed Wojtowicz are: Philip M. Cavanagh, D-Redford Township, a former state representative; Richard P. Hathaway, the county’s chief assistant prosecutor; state Sen. Bert Johnson, D-Highland Park; Beverly Kindle-Walker, a onetime candidate for Detroit City Council; George “Jerry” Paffendorf, CEO of Loveland Technologies; David J. Szymanski, who retired this summer as the county’s chief deputy treasurer; D. Etta Wilcoxon, who ran for Detroit clerk in 2013, and James W. Williams IV, who has run for the Detroit Public Schools board.

A panel of three officials — Clerk Cathy Garrett, Prosecutor Kym Worthy and Chief Probate Judge Freddie Burton Jr. — is expected to appoint an interim treasurer by next month. The post pays about $116,000.

“We need someone who can strike a balance between collection taxes and taking property,” said Ted Phillips, director of the United Community Housing Coalition, a nonprofit that works to help poor residents keep their homes.

67K sites risk foreclosure

The county is notifying owners of another 67,000 county properties that they face foreclosure in March and auction in the fall if they don’t pay their bills. In the past two years, the treasurer has paid about $4 million to place thousands of foreclosure notices on properties.

Jones, who lives on a disability check of about $750 a month, said he knows he’s at risk of losing his house but doesn’t have the money.

He had been homeless on and off for a decade before squatting in the home without a toilet or heat in 2012. He bought it when treasury officials offered to sell him the home after it failed to sell at the auction. The county offered the same deal to hundreds of occupants of unsold properties that year but hasn’t done it since, instead handing over auction leftovers to the Detroit Land Bank.

Jones has spent months chipping away at repairs when he can afford it. The city has valued the home at $22,000, putting his taxes at $1,300 a year.

“It’s too much,” Jones said. “I can’t afford all that.”

The city has lowered assessments 5 percent to 20 percent in some neighborhoods for the last two years and officials say they continue to try to properly value properties. The city does not use the auction sale prices to value properties because they say they are viewed as distressed sales.

“We are examining every structure,” said Chief Assessor Gary Evanko. “We are making a strong effort to identify (homes that are over assessed.)”

ACLU of Michigan officials have monitored the sale and are concerned by the “large number of residents in Detroit being wrongfully evicted from homes because of tax foreclosure” in part because of over-assessed homes, said Michael J. Steinberg, the group’s legal director.

A magnet for speculators

The annual auction attracts hundreds of out-of-state speculators and local investors who buy cheap, with company names like Cash Flow to Retire LLC and Detroit Progress Fund III LLC.

Singapore investor E.E. Meng Peh bought 419 properties in the 2013 auction. The average price: $790 each. Now, all but four are delinquent in taxes, owing $1.3 million as of September. The Detroit News surveyed 20 of the houses near McNichols and Interstate 75 and all appeared in poor shape and unoccupied.

Efforts to reach Peh were unsuccessful. Joseph Brophy, a real estate investor who worked with him on an apartment complex in Detroit, described Peh as “an investor willing to stomach an enormous amount of risk and not really look into unknown details, like a normal investor.”

“The strategy is buy really, really low, no matter the condition and hope to sell high. I think there were good intentions. I just don’t think, when he got into the Detroit market, he understood how much work it is to maintain and run rental properties,” said Brophy, general manager of Silverside Management of West Bloomfield.

Treasury officials say they’ve implemented reforms targeting speculators. They’ve grouped thousands of vacant lots and deteriorating buildings to auction together. When the bundles don’t sell, the properties go to the Detroit Land Bank, which vets the buyers and holds them to development agreements.

And this year, treasury officials require buyers pay the summer 2015 taxes along with the bid price. A new state law also prevents bidders who owe back taxes or blight fines from buying more properties, although critics argue investors could avoid scrutiny by forming new companies.

cmacdonald@detroitnews.com

Poverty exemptions

Michigan law allows those who meet poverty levels to lower or eliminate property tax bills. That works out to $16,600 per year for individuals.

In Detroit, the Board of Review considers written requests and applications for exemptions. Last year, there were 4,214 applications, of which 3,678 percent had taxes eliminated, 127 were reduced by 50 percent and 409 were denied.

Source: Loveland Technologies and the City of Detroit.

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