Spare Mike Reed the hype of late-night infomercials that portend profit for investors who can buy real estate, automobiles and other property from the government for "pennies on the dollar."
Reed, tax division director of the Salt Lake County auditor's office, has staged tax sales each May for the past 17 years. Contrary to glitzy sales pitches or seminars and books intended to turn middle-class Americans into real estate tycoons overnight, Reed says government sales are the last place to find a true bargain."I wouldn't find tax sales to be what the seminars portray them to be. I don't think there's anyone I've seen who turns a large profit year in and year out by buying and selling tax sales," Reed said in a recent interview.
The county sells only properties for which no property taxes have been paid for the past five years. In some cases, strips or chunks of larger parcels are sold, which frees some property owners from delinquency but also from a piece of their property.
Some buyers sell the small strips of land back to the original owner at a profit, but it's usually no great sum of money, Reed said.
Simply put, from the government's perspective, it would be foolish to sell something for nothing because ultimately the loss is absorbed by all taxpayers. "The county's real desire is to have that property owner pay the tax. That's it," Reed said. "Our goal is to make sure they (tax lien buyers) get the least possible for their money."
And often times what people acquire in addition to small parcels of property are major legal headaches.
Just because they buy land at a tax sale doesn't mean the real estate has a clear title. Liens may be exercised after a tax sale and the Internal Revenue Service can void a sale six months after the fact.
Meanwhile, the Federal Deposit Insurance Corp. can intervene if it has an interest in the property.
"What's the old adage? `If it's too good to be true, it probably is.' I'd say that applies to tax sales," Reed said.
And so goes buying property seized by the federal government in drug investigations.
"We don't offer any exceptional deals. If they're looking for real good buys and they're trying to get it from me, forget it," said Ted Osborn of the U.S. Marshals Service, which conducts drug forfeiture sales.
In the case of real estate, in some cases the posh homes of drug dealers, the property is listed with real estate agents. The agency usually lists only a handful of homes each year. Ordinarily a potential buyer wouldn't even know the home had been seized in a drug-related arrest unless the real estate agent told them so.
It is in the government's best interest to sell the real estate at market price, Osborn said, because proceeds from the sale are used to defray the cost of housing drug offenders in federal prisons and to purchase cars, radios, firearms and other equipment used in drug enforcement work.
The IRS also auctions a limited number of homes, but spokeswoman Jan Hadley said the numbers are negligible. "It happens so seldomly, I wouldn't list us as a good place to look for a personal residence," Hadley said.
The homes for auction are listed in legal notices in the classified ad section of newspapers on occasion. The term home auction may be misleading. Technically, bidders at IRS auctions are buying homeowner equity, not a house.
IRS officials warn that homes sold at the agency's auction also may carry liens beyond what is owed to the federal tax agency.
In any tax sale, buyers should beware.
"If you go to the tax sale and expect to pick up a house you can fix up to live in, my 17 years of experience say the odds of that happening are negligible that you can end up with anything like that," Reed said.