Tax Auctions: How to Find a Cheap Home in New York

Urban legends grow out of the exaggerated retelling of a good story that contains at least some truth. Like most people, I had heard tales of unbelievable bargains at the tax auction, but after my significant other was turned down for a VA loan because of his credit history, we decided to investigate the possibilities offered by the city tax auction in Buffalo, NY, where many of his relatives live.

At that time, the spring of 2004, we had a few thousand dollars saved. We decided to try to pay cash for a house if we could, which would make it easier to clean our credit and repay old debts later. We searched the internet, and found that the annual Buffalo, NY tax auction would be held on October 25 and 26. We had visited Buffalo before. We knew it as a once-thriving city whose population is half of what it had been 50 years ago, with many vacant dwellings.

The city website at http://www.ci.buffalo.ny.us is very accommodating, and lists the properties scheduled for sale at the tax auction in both Microsoft Excel and Access format. Every time the city of Buffalo updated the Excel spreadsheet, which is more often the closer it gets to the day of the tax auction, I went through it and marked off the properties that met our initial search criteria. We wanted 1,200 to 2,000 square feet, two bathrooms, a garage, and an assessed value of $30,000 or less, because we didn’t want to go over $5,000. A week before the auction, I had a list of about 150 properties to choose from, and I printed out the information on each property from the city website.

Four days before the tax auction, at the stroke of midnight, we drove from our apartment in the suburbs of Washington, D.C. to our intended new home town. We arrived in Buffalo the next morning and rented a room in a cheap motel. I had my stack of papers on the properties we were going to look at, and we drove around town, after buying two things that helped tremendously:

1. Disposable cameras: We had these developed by the one-hour photo service at Walgreen’s.
2. Green, yellow, and red stickers: Green was for the properties we were definitely interested in bidding on. Yellow was for the “maybe” pile. I ended up not using the red stickers at all; I just threw away the papers on the properties that didn’t interest us.

He drove, and I snapped pictures of houses, and wrote everything down that I could think of. He insisted, and I agreed, that to green-light a house, the house must be squarely built, with the roof in apparent good condition, and no trees growing too close to the house. I must tell you that we saw an awful lot of really terrible houses, but, after three days of driving around taking pictures, we had a short list of about 15 houses we were willing to bid on. The night before the auction, we dropped off the cameras at Walgreen’s, picked up our photos an hour later, and talked for half the night about which house we thought we would live in.

The next morning we took our places in a line of like-minded people outside the Buffalo Convention Center. Almost as soon as the auction began, the bidding opened at $4,000 on the first of our 15 possible new homes. It was a big, solid-looking older house, but we had seen people moving out of it the night before, and we decided not to bid because we didn’t want any trouble from previous owners or tenants. As it turned out, nobody bid on that house at all. A few hours passed, during which we were outbid three times, and at 4:00 the house we now live in came up for bid. The bidding opened at $3,000, and we would have gotten it for that price if someone had not raised his hand and then said he had made a mistake. His vacillating cost us $200, but it was still a fantastic deal!

We immediately paid the required deposit to the city with a cashier’s check for $1,000, then drove to take another look at the house. In all the excitement, we were not quite sure which house we had purchased! I was thrilled to see it had two apple trees in the back yard. We couldn’t tell whether anyone still lived in the house or not. We met a few of the neighbors and then went out to dinner to celebrate. The next day we went to City Hall and paid the remainder of the purchase price.

Back in Maryland, we soon received a letter from the City of Buffalo to confirm that we had purchased the house. The letter also advised us that we would need to wait approximately six weeks before doing anything such as evicting tenants, demolishing the property, or moving in, at which time they would send us another letter. Right on schedule, the second letter came, and we moved into our new home on December 13, 2004, during a terrible snowstorm. The previous owner met us and welcomed us to the neighborhood. She lived across the street, and had never lived in our house nor wanted to. Her husband had bought it as a fixer-upper and paid to have new water and electric service brought in from the street, but then became ill and abandoned the project.

So we have now owned the house for close to a year. We have put in new copper pipes throughout the house, fixed a leak in the roof, knocked down some interior walls, and redone the railings on the front porch. The first two of these projects were done by local contractors, referred by some of our good neighbors. Even now, we still have a lot more work to do, but we are very happy to be here.

If the house had not been livable when we arrived with our truck and U-Haul trailer full of our possessions, we would have rented a house, of which there are many in Buffalo, and then decided what to do. Fortunately, the house was in just barely good enough condition for us to be able to live there. The Mayor of Buffalo has expressed the preference to not sell distressed properties to people from outside Buffalo, and has established an Anti-Flipping Task Force to discourage the practice of buying cheap properties at the tax auction and elsewhere while planning only to sell them on eBay to out-of-towners at inflated prices.

I would advise everyone who wants to emulate our success to take the time to drive around the city and examine each property as closely as possible. As it turned out, we did get inside two of the houses we were considering, but most of the time one would not be able to go inside. Write everything down, no matter how insignificant it might seem. Do not trust your memory or tell yourself that you “know” a particular neighborhood.

One would be free to arrange for financing on a property to be bought at auction, at least in Buffalo. A deposit of at least 20% must be paid by cash or cashier’s check during the auction, with the remainder to be paid within six weeks.

A tax foreclosure is different from a bank foreclosure. When taxes on a mortgaged property are in arrears, the bank is notified, and is more than happy to pay the taxes to avoid losing the property altogether.

The good news is that when the city forecloses on a property, any and all previous mechanic’s liens, mortgages, or claims associated with it are canceled. There are no closing costs or title searches necessary on a tax sale property.

Good luck to everyone!

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