April 8, 2019

Wayne County is the home of Detroit, Michigan, and, by extension, a hot location for real estate investors. For this reason, thousands of bargain hunters register to buy foreclosed homes in the area and bid in local tax auctions. They hope to snag Detroit properties at deep discounts, then either fix them up and “flip” them to retail buyers or hold them as long-term rental properties. The potential in the Detroit area remains enormous as a result of lingering fallout from the housing crash in the mid-2000s.

It will likely come as no surprise, then, that local government officials are falling prey to the temptation to take advantage of their position in the government to give their own real estate portfolios an “edge” in the process. With so many investors active in the area, prices are rising quickly and deals are getting harder to find. It appears that at least one major official, the Wayne County treasurer, may have overstepped as he attempted to straddle the fine line between investing in Detroit and caring for the city’s investors as a public official. According to The Detroit News, (Feb. 2, 2019) Eric Sabree, current treasurer for Wayne County and chief tax collector for the same, has permitted his family to purchase properties at his foreclosure auctions. This is strictly and directly prohibited by Treasurer’s Office rules.

According to the reports from the Detroit News’ Freedom of Information Act (FOIA) requests, Sabree and his family purchased a number of properties at auction, allowed them to fall into further tax delinquency, and then avoided seizure of those properties. By November 2018, 10 of the properties owned in a company formed by Sabree and operated by his wife were nearly $29,000 delinquent in county taxes. According to state law, at least one of those properties should have already been sold at auction. However, all were redeemed within 10 days of the paper’s first FOIA inquiry.

Sabree appears largely unrepentant, admitting that he “truly regret[s] that I didn’t get more involved in my family’s long-standing real estate business by directing them away from auction properties” but adding that he believes the issue was “less problematic when city and county real estate was lagging.” He went on, “Now that the city and county property values are on the rise, there could be a perception problem or appearance of lack of transparency.” He also suggested that Wayne County permitted family members to participate in auctions during 2014 and 2015, although the practice was “never formally adopted.”

Sabree’s “perception problems” are only worsening, since it has recently come to light that his wife purchased a property in 2008 that Sabree himself had classified as blighted and seized on behalf of the city in 2007. The amount of that purchase: $500.

Don’t Let One Bad Apple Spoil Your Real Estate Barrel

So, is the lesson here that real estate auctions are something to be avoided because corruption is rampant? Not at all! The lesson here is that every real estate investor needs the same type of “inside track” that Sabree enjoyed – but one that is perfectly legal, of course.

Real estate foreclosure auctions of any type can be intimidating to new investors and experienced investors alike. They are fast-paced; you are taking on complicated relationships with property owners and the local government, and every state and sometimes every city has slightly different guidelines for the process. You must invest not just in property but in the knowledge and resources to obtain the right properties at the right prices for your investment strategies.

For example, did you know there is a type of foreclosure called a “pre-deed foreclosure” that actually encourages real estate investors to foreclose, is in incredibly high demand, and sells very, very quickly? You can be quite certain the “insiders” at your local auctions do, and often if you do not know where to look you will never see this type of deal at all before it’s gone. Similarly, were you aware there are ways to target foreclosure properties that will earn you substantial interest or yield the result of owning a property at a fraction of actual value within a relatively short time period? You can definitely count on “insider” investors knowing how to spot those.

Getting the right type of advisors and action-takers on your team to help you identify the things that every auction insider knows can dramatically change your returns, yields, and results in real estate for the better. Don’t go it alone when these auctions are anything but a one-man or one-woman game. Even if there are not any city officials involved in “shady” business (or the appearance of shady business), you still need the power of knowledge and the ability to act effectively on your side to make any auction a tool for your success.

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