VAN BUREN, Maine — The Aroostook County town of Van Buren hopes the seller-friendly market in Maine’s booming rural real estate economy will turn tax-acquired property into cash through the online marketplace Zillow.
The move represents a break from the traditional methods towns use to sell tax-acquired properties — auctions and sealed bids advertised through local media and town websites. But the council and town manager in Van Buren see Zillow as a viable way to recoup losses in tax revenue from the properties, and potentially make enough in profits to fund downtown revitalization projects.
Towns acquire property when the owner fails to pay their real estate taxes or sewer bills. The municipality places a lien on the property, and alerts the owners that they are in debt to the town. The property owner gets two notices: first when the town applies the lien, and the second 17 months later, when they have only 30 days left to pay.
After a town claims a property, it can dispose of it however it sees fit, according to the Maine Municipal Association.
Van Buren has lien title over seven properties it is considering selling — three homes and four pieces of land.
“These houses may not be beautiful, but people are living in them, and so it means at least the heating works, the electric works, the plumbing works, the sewer works, the roof may or may not need replacement,” Van Buren Town Manager Nancy Troeger said at a March 16 meeting. “At the highest, one of these houses [owed] $8,000 — not impossible to get that.”
Families occupy two of the three houses, Troeger said. Both owners had reached out intending to pay off the debt, but the town has received no payments, and is considering selling the properties unless that changes, she said on April 20.
The town council is considering Zillow as an option to sell these properties because traditional methods have brought relatively poor financial returns. The town has sometimes sold tax-acquired buildings for just a couple hundred dollars, Troeger said.
“Property and houses of all conditions in The County have been going for incredible prices right now,” Van Buren town councilor John Beaulieu said at the March 16 council meeting. “The market is most definitely and decidedly a seller’s market… it makes no sense to me to hamstring the town into only accepting closed bids that would cover our tax and sewer lien and closing costs when we could be generating far more money for the town that we could use to take care of some of these other derelict buildings that are not going to sell.”
The council voted unanimously at that meeting to amend the property disposal ordinance to allow selling on the real estate market.
But Van Buren isn’t the only town that’s been looking outside of the norm for tax-acquired property disposal. In Madison, a small Somerset County town in central Maine, the select board voted earlier this year to list an unoccupied tax-acquired property with a realtor — a first for the small town.
The town normally bundles its tax-acquired properties for auction, but with only one property to sell this year and the real estate market more vital than ever, the council hoped the non-traditional sale method would help draw more bidders, Madison Town Manager Tim Curtis said.
“We wanted this property to get cleaned up so we needed it to get turned over pretty quickly,” Curtis said.
While selling online might be a good option for the towns, the tax-acquired market is fraught with complications.
People occupying tax-acquired properties will likely lose their homes unless they’re able to pay off their debts. At the March 16 meeting, the council verbally agreed that once the town acquired a property, it would give the previous owners just one chance to pay off their tax debt.
Meanwhile, buying tax-acquired properties is equally risky. There’s always a chance that the town improperly acquired the property in the first place, giving them no right to sell. This has happened at least twice in Van Buren, Troeger said.
In one case, the town failed to send a notice of foreclosure until more than 50 days after it went into effect, breaking the 45-day window to foreclose, Troeger said at the March 16 meeting. In another case at a different property, she said only that the town “sold it in a window in which we couldn’t sell it.”
Edmond Bearor, a partner at Rudman Winchell law firm in Bangor, specializes in municipal and real estate law, and served as Newport’s town administrator for a time. These kinds of errors in acquisition are relatively common among municipalities, he said. It’s one of the things that makes buying tax-acquired a little dangerous — a new owner could be investing in legally disputed property.
The quitclaim deeds the buyers receive when purchasing these properties are also risky and often do not give owners clear title over the property, he said. That means that if a new owner wants to take out a loan for renovations, they will likely come up empty handed.
“In the real world, nobody is going to lend you money,” Bearor said.
Even with all the complications, Bearor said towns have the right to sell tax-acquired properties, and to do it in whatever way they see fit.
“I encourage towns that I represent, don’t just go with this idea of the sealed bid and going with the highest bidder,” Bearor said. “Why don’t you think of this as an opportunity to do something for the town?”
Acquiring property isn’t by any means Van Buren’s goal, Troeger said, adding that she’s worked out payment arrangements with owners experiencing financial hardship.
“The only ones we’re ready to sell right now are those in which we have given every effort to these families to pay their bills,” Troeger continued. “But I’ve got to do my job.”
Maine Association of Realtors President Aaron Bolster said he’s never seen another market like this one, and he wouldn’t be surprised to see towns with tax-acquired properties benefit.
“They’ll get more money than they should for these properties because they’ll look like a steal and most people will roll the dice out of desperation or just pure risk,” Bolster said.
Van Buren has yet to evaluate the properties it intends to sell. At an April 20 council meeting, deputy town manager Luke Dyer said that as the weather improves, the town will start listing its properties on Zillow. The town will likely list the one unoccupied house first to test the idea.
“We definitely want to do it, we want to see what’s happening because just about everything that’s out there is selling anyways,” Troeger said.