Written by Derek King, an Architectural Historian in Buffalo, NY, and writer for The Preservation Exchange.
It was clear as soon as I entered the Convention Center that Buffalo’s In-Rem was much bigger than I expected.
Two lines extended across the full length of the lobby, and all the tables in between were filled with individuals looking to purchase lots and buildings during the City’s 47th annual foreclosure auction of properties delinquent on their taxes. In line were city residents hoping to pick up something on their streets standing next to real estate investors from Toronto and New York. Men wearing kippahs stood behind women in hijabs, and scarf-wearing bakery owners eyed local developers and waved at neighbors.
Between the big diverse crowd, the high energy, and the future on everyone’s mind, it was a quintessential Buffalo event.
Buffalo’s In-Rem is an annual auction each October where attendees can bid on properties whose owners have not yet paid their taxes, or other bills related to the property such as water and user fees, and is then different from a mortgage-foreclosure auction. Many of these properties have been vacant for years; some of the lots auctioned, where the buildings were demolished years ago, have been on the In-Rem list for over the last 10 years.
The auction’s existence isn’t very surprising, as many cities have similar events. In Detroit, the number of properties in foreclosure each year is so high that Wayne County began bundling large packages of lots, between 400-1,000 properties, in order to entice more serious investors. It wouldn’t be an unprecedented move either, as Detroit recently agreed to sell 140 acres of land to Hantz Farms for them to plant trees upon. Though criticized by many as a thinly veiled land grab for future speculation, Detroit does actually achieve two goals with the deal; first, it gets a large portion of its vacant land back on the tax rolls, and secondly, it may actually drive up the cost of real estate in Detroit by creating an artificial scarcity.
For many, it may not be surprising to here about these problems in Detroit, as their issues with vacancy and monumental debt are well documented in the national media. Fewer likely know , however, that Buffalo and many other Rust Belt cities face similar issues of vacancy and housing foreclosure. In 2010, during the last Census, Buffalo had almost 21,000 vacant homes within city limits, representing over 15% of the total housing stock. That number didn’t even account for the over 3,300 acres of vacant land in Buffalo. Though that number may have decreased slightly since then, it is still a very daunting number, especially considering the city only owns 4,000 of those vacant properties.
Each year, the In-Rem Auction attempts to get some of these vacant properties back on the tax roll. In 2012, over 3,100 properties went to auction, and a little over a third were sold. The remaining two-thirds were either sold to the city, or “adjourned.” Some attendees joked that adjourned was just another way of saying the delinquent owner got a free pass. Based on the number of vacant lots that have been repeatedly adjourned, the city has issued a lot of free passes over the years.
Once people filed into the main conference room, the real fun began. Attendees began discussing the different strategies they’d employed in scoping out certain properties, everything from cursory drive-bys to peeking in windows. Analysis of the real estate market in Buffalo, by amateurs and professionals alike, bounced back and forth. Some people were there looking for their first properties, others for investments. Some wanted vacant lots abutting their homes, others were tired of no one taking care of the house at the end of their street.
Right before the auction began, several individuals gave some important points for attendees to consider. These included: owners purchase properties as-is; anyone suspected of driving up bids or collaborating with others would be tossed out; and several rules to prevent house flipping were outlined. The Anti-Flipping Task Force noted, in particular, that houses had to be owned at least six-months, and could not be sold for over 120% of the buildings purchasing cost during that time. Individuals found in violation would be held accountable, and though a punishment wasn’t noted, the withering stare of the Task Force’s speaker, Joy McDuffie definitely drove home the fact that it would be serious.
Then it began.
The pacing was incredibly quick, as the auctioneer (and City Treasurer), Michael Seaman, stormed through vacant lots at a break-neck speed. He burned through the beginning of the list, which included many vacant lots that had been part of the auction for years. When he arrived at a building, he definitely demonstrated his skills as an auctioneer.
The early bids hinted that this was going to be an exciting few days. As Hawkeye Maps noted about last year’s auction, the average bid was around $7,000, with 50% of the properties sold under $3,000. This year, the average over the two days I attended was closer to $10,000. After several bids were over $120,000, there was even applause.
During a break, I asked local developer Bill Breezer if this was how it always was. “I started buying rental properties in the late 70s, and probably began coming to this in the 80s,” he told me, “but it’s definitely gotten much more popular over the last few years.”
Though exciting, the fact that thousands of Buffalo properties each year go up for auction is not an encouraging sign. Grouped with the vacancy issues noted above, as well as with a 40% ownership rate of occupied housing, the In-Rem is another sign of how far Buffalo has to go before it has anything resembling a stable real estate market.
For some, this is bittersweet. Young people in particular look at this year’s In-Rem as a last-chance opportunity to take part in an economy that’s booming compared to Buffalo’s recent past. “It’s bad,” said Bernice Radle, one of the co-owners of Buffalove Development, and one of the “young folks” at the auction, “but it’s bad in such a good way.”
One of the good features of higher prices is higher down payments by bidders. Anyone who purchases a property has to pay either the full price, or at least $500 (for vacant lots), $2,500 (for most buildings), or 10% of the sale price immediately on the premises with the full price paid by the first week of December if the winner sought to keep the property. If bid-winners have to put more down upfront, they’ll be less likely to walk away if the building requires more work than they’d like, and the building would be less likely to return to auction the next year.
Of course, higher bid-prices also meant that most buildings and lots were out of reach for local individuals looking to buy their first home or first investment property. After developers and investors, the next biggest demographic seemed to be young couples, one of whom compared the most recent lists of available properties to laptop databases they’d compiled, and during bids elbowed their spouses and partners as the prices went too high.
Though it was exciting to see buildings sold for such high bids, an alarming number of vacant lots were adjourned, many of which had been at In Rem for the last 10 years. With the news that the Erie County Land Bank just secured $2 million in funding, there could be an opportunity to take these vacant properties off the market and create real stewardship for their maintenance. Instead, the adjourned lots, as well as any properties deemed “too risky” to rehab by bid-winners come December, will return to the In-Rem once again next year.
Looking over this years results, it turns out those two bids were the highest of the auction, both by Albert Burruano of Western New York Property Investors Inc. Only one other bid went over $100,000, but many sold for over $20,000. A quick scan through the final results will drive home the diversity present in the Auction Hall, but considering how positive people were at the auction, it is does underscore the bitter reality that Buffalo faces when it comes to vacant and foreclosed land. The sheer number of properties “adjourned” or “struck to the City,” really does show how much further Buffalo has to go.