When Haywood County gets stiffed on property taxes, it carries a big stick of last resort: the foreclosure.
But since the real estate bust, it’s not been as handy as it once was.
In theory, when someone doesn’t pay their property taxes, the county forecloses and recoups the back taxes from the sale price. But what happens when no one shows up on the courthouse steps to buy it at the foreclosure? Or when the bids that do come in are so measly it doesn’t make sense to sell?
“We are not in the real estate business, but we wanted to at least get back taxes owed and the expenses of going through the foreclosure,” said Commissioner Mark Swanger.
Usually, the threat of foreclosure is enough to spur the property owner to pay up.
“There are about 50 foreclosures in different stages each month. Most pay out,” said David Francis, the Haywood County Tax Administrator.
Only about one foreclosure a month actually goes all the way through to the courthouse steps.
Usually, there are interested buyers, but there’s been about a dozen instances in recent years when there was simply no interested bidder.
But most of the time, when the county comes up empty handed on foreclosure day, it involved a lot that was flawed in some way — too steep to build on, no road leading to them, or simply one of those dime-a-dozen lots that no one’s really interested in — or a house that was in a bad location or a state of disrepair.
So, instead of recouping the back taxes, the county ends up owning the property itself.
But the goal is ultimately to unload the property and recoup the back taxes, so the county moves to plan B: an auction.
The county hasn’t fared so well at auctions either.
Until now, when the county struck out at foreclosure and went to the auction stage, it was obligated to take the highest bidder.
If the highest bid was only a few hundred dollars, the county had to take it. And that just didn’t make sense.
“We didn’t want to give property away,” Swanger said. “If you aren’t going to get anything out of it, you may as well put it on the recreation inventory and let people garden it.”
Francis broached the dilemma with commissioners last fall. In addition to back taxes, the county incurs legal and advertising costs to go through a foreclosure and auction.
“One of the things we wanted was to make sure we were at least getting our cost back,” Francis said.
Legally, the county can’t set a minimum bid when it auctions off unwanted property. But County Attorney Chip Killian figured out a work around.
“The safe harbor is that you can put in a provision that gives you the right to reject any and all bids,” Killian said.
Under the new policy, the county manager can simply decide to reject the bids and not sell the property if they come in too low.
Francis had halted auctions of foreclosed property last year after a couple of insanely low bids brought the issue to light. He’s now accumulated an inventory of around 10 lots that had no buyer at foreclosure and are waiting to be auctioned once the new policy is in place giving the county recourse to reject a bid deemed too low.
When to foreclose is a judgment call that’s ultimately up to the tax collector. In some cases, the county won’t go to the mat with a foreclosure, and will write off the unpaid taxes.
The most common case is trailers lived in by people who are so poor and destitute they would become homeless if the county foreclosed on the tin box they live in.
“These people are in poor or in dire conditions,” Francis said.
Their trailers are in such bad shape, foreclosing would do little good in recouping the back taxes anyway. No one would emerge to buy the trailer at foreclosure, so the county would be stuck owning it.
Unfit to live in, there’s little chance the county could ever auction it off. So the county would eventually have to dismantle it and haul it off, on its own dime. Since the attempt to gain back taxes would only further saddle the county with the burden of getting rid of it, the county just lets them slide.
Speaking of slides, that’s another instance when the county has simply opted to ignore an unpaid property tax bill. When a landslide destabilized the foundation of a home in Maggie Valley’s Black Camp Gap area, rendering it unsafe, the owner quit paying his mortgage and taxes. But the bank nor the county have been eager to foreclose. It would be pointless. No one would want to buy the property, considering the repair bill to shore up the slide.
Which means the county would just end up owning the property if it foreclosed, and instead of recouping back taxes, it would be stuck with the liability.