Tax possessions, tax titles, surplus property …What is all that?

Municipal auctioneers provide services for cities & towns that need to liquidate real estate, tax titles and surplus equipment. Tax title, tax possession and surplus property auctions provide municipalities a means to generate much needed revenues. Tax possessions are properties that have the right of redemption foreclosed upon by a municipality through the land court and are now in the possession of the city or town. At a tax possession auction, bidders purchase real property that’s in the municipalities’ possession following a tax foreclosure judgment. Tax title assets are an entirely different type of investment. Under Massachusetts General Law, cities & towns are allowed to sell tax titles by assignment at public auction. When a property owner is seriously delinquent on their taxes, their property goes into tax title status. One might ask: “If tax possession properties and tax title assets are different then what exactly is a tax title? Answer: Tax titles represent the town’s receivable position on a property. Winning tax title assignees, (the high bidder) steps “into the shoes” of the municipality and are entitled to 16% interest on the principal balance of the tax title if, or when the property owner satisfies the tax liability held by the now third party investor, (this is also known as redemption).The assignee, (the winning bidder at an auction), can elect to pursue tax foreclosure of the right of redemption proceedings to gain possession (ownership) of the property. Unlike a mortgagee foreclosure auction when a third party investor acquires the real property by land court judgment that investor is entitled to keep all proceeds resulted from any subsequent sale and the previous owner of record is not entitled to reimbursement of any overage realized above the base tax liability. Surplus property auctions are described as when municipalities sell real estate and equipment that is no longer needed by the city or town.

More about the different types of municipal property auctions:

Tax possession, tax title and surplus property auctions are an excellent opportunity for investors, residents and municipalities on many different levels. Municipalities can rapidly generate revenues for assets that are otherwise idle. Investors have a chance to generate an excellent return on their investments. Residents can add to their properties at auction prices when abutting lots are available for sale. Surplus property auctions liquidate assets the city, county, or state no longer uses. These items can include office equipment, furniture, light fixtures, automobiles, heavy equipment, tools and real estate. Surplus auctions provide people an affordable option of obtaining items at a fraction of their original costs or value. Municipalities often hire third party municipal auctioneers to handle the details of tax title, tax possession and surplus property auctions. The third party firm provides the municipality with expertise in accelerated auction sales and auction marketing. Municipal auctioneers organize the auction, advertise the property, conduct the auction and collect payments from successful bidders. Auctions may be conducted live on the internet via an online absentee bidding option, or perhaps a live real time internet simulcast for the convenience of those participants who wish to engage remotely. Live auctions are commonly used, where bids are taken by the auctioneer until no more people desire to bid on the property. The person with the highest bid is the winner and receives the asset upon payment. Efficient experienced municipal auctioneers work with the local government to determine the best type of auction method to use for the property being sold. Municipal auctioneers may have established minimum opening bids for certain properties as well as set reserve prices. The minimum opening bid is the lowest allowable amount the municipality is willing to accept for the property or asset. Massachusetts General Law mandates that the minimum bid upon a tax title asset must be the total liability due. Tax possessions, (properties that were granted a judgment through land court), however do not have a law mandated minimum bid. Often properties often sell for more than their past due tax amounts when the balance due is only the fraction of the true value of the property. Reserve price auctions are where the municipality will set a price limit which must be met in order for the property to be sold. Past experience has proven that these reserves are typically very reasonable as the municipalities are truly motivated to get these assets back on the tax roles and the numbers often change on auction day as the local government will often consider the overall sale proceeds in the aggregate many times offsetting some of the assett that would have otherwise fallen short of expectations. Reasons why Municipal Auctions can be an attractive vehicle for today’s investors:

  • 16% interest on municipal debt upon redemption
  • Much higher return on investment if land court awards foreclosure judgement for the right of redemption and the investor acquires the property.

When considering investing in Massachusetts tax assets please be sure to perform your due dilligence and fully understand M.G.L. Chapter 60 Strategic Auction Alliance provides municipal auctioneers, charity auctions, industrial auctioneers, real estate auctioneers, personal property auctioneers and appraisal services. For more information on holding or participating in an auction in the New England area, visit our website or call 877-426-8175.