Bidding on Houses at County Tax Auctions

I tried to buy two houses at auction today. I would have settled for either one, but unfortunately ended up with neither.

I had prepared for weeks; researching lien holders, visiting houses and taking pictures, examining books of county plat maps, checking property assessment records, narrowing down the list of a hundred houses available through the San Joaquin County Tax Auction down to two.

Only those two met my criteria; fixer-uppers in a decent area and in good condition, without environmental hazards, a starting price far less than they were worth, and still available after the redemption period had expired.

Photo © Richard D. LeCour

I woke up at 6:00 a.m., got in the car about 6:15, and drove the 90 minutes to get to Stockton. The auction didn’t start until 9:00 a.m. at the local civic auditorium, so I had plenty of time to locate the important stuff; the auditorium, the local Wells Fargo, a drinking fountain, an accessible bathroom.

I often use satellite images to verify existence of buildings and land usage, but there is no substitute for physically driving to the property to view current conditions.

Satellite images won’t tell you if the disgruntled previous owners burned the house down a week ago, or that all the windows have been broken and the copper plumbing has been removed by thieves and vandals…

A Dash for Cash

Unfortunately, when I began the registration process at around 8:00 a.m., they denied me access, saying that I needed at least $10,000 in cash or other negotiable funds in order to prove I could pay for any properties I might win, notwithstanding the fact that the instructional preparatory paperwork allowed payment in full after the entire auction ended — and nowhere did it mention needing to have $10,000 in your pocket.

Oh, sure! I carry $10,000 in my wallet all the time. Hello? I’m not exactly Bill Gates, and that’s not exactly pocket change. Instantly coming up with copious amounts of cash was just about the only thing I hadn’t planned for.

By now it was almost 8:30 a.m., the auction was slated to start at 9:00 a.m., and the bank didn’t open until 9:00 a.m.. Since I couldn’t be in two places at once, I figured I had to try something. Fortunately, I’d had that extra time to reconnoiter key building earlier. I walked a block away to the local bank branch, and hung around. About a quarter to nine, employees started arriving to work and I stopped two of the girls and asked to speak to the branch manager. They obliged, and I told the branch manager through the side door that I was in a jam and that I needed to have $10,000 to take to the county government offices in about ten minutes.

Smiling sweetly, I asked, “Would you mind opening the bank early for me?” If I’d had dimples, I would’ve used them, too.

She relented. Yet another blow, the checks I had brought with me weren’t good anymore — they were older line of credit checks that had apparently expired automatically. After three failed attempts at other methods of getting cash, I ended up putting the $10,000 on an empty credit card with a $50,000 limit. Despite the setbacks, timing was still in my favor; if I’d waited until the bank normally opened and gone through the same rigmarole, I would have missed the auction.

At 8:57 a.m., with money in hand (there was a heavy police presence all around so it was safe), I dashed back to the auditorium where I cut in a line of about 40 to 50 people, showed my money, and received my placard: bidder number 1 (I had already signed everything when I was previously first in line.)

The Auction Begins

About 250 people were in the room, more than half observers, learning the process, trying to figure out what to do. Most of the veterans, like myself, are pretty closed-mouthed — we’re not really that interested in educating others who will eventually be bidding competitors. Late-night TV infomercials sell education packages on buying properties through tax auctions, but they don’t tell you that the methods they propose don’t work here since California is not a tax-lien state. A lot of people have lost their life savings by following instructions given by these infomercials. Don’t be one of them.

Anyway, with only sixteen of the original hundred properties left on the block at the start of the auction, I was interested in two; the first I didn’t want to pay more than $55,000 for, the second worth no more than $50,000 as is. The auctioneer began, obviously a novice as she could barely keep track of the bids let alone the bidding numbers. She was equally confused and confusing. She should quit her day job.

There are four types of bidders: the veterans, the casual bidders, the casual investors, and the ardent wannabe homeowner. It’s easy to spot the long-time veterans at this; the suits, the briefcases, the reams of paper. A few others I recognize despite the Hawaiian shirts, the slicked-back coifs. Me, they think an easy target. I dress casually — Levis and denim shirt, tousled hair, unshaven — asking seemingly naive questions, putting them off the game, pretending I’m a different kind of player. My only potential giveaway is the clipboard I carry. When I bid, I don’t want them to know I’m a veteran, a pseudo-suit, a Hawaiian shirt, just like them. It’s this fourth group, the wannabes, that I emulate. The fourth group that the suits don’t bid against. Call it knowing that they don’t have a chance so they might as well let it go at a reasonable price. It is a game, and I’m a player.

As usual, it worked. I outlasted the suits and shirts. I just didn’t outlast the casual investors this time.

An hour later, I left, disappointed, heading back to Wells Fargo to return the no-longer-needed money. The auctions were hotly contested, but the first house eventually went for $57,000 (just over my limit) and the second sold for $66,000. Neither too rich for my blood, just past the comfort level of money I wanted to spend for either property considering the amount of work needed to get them back into shape for resale on the open market. I’m in it for the money; once that financial threshold is met, my interest is gone; I won’t put potential profit margins at risk.

I arrived with the idea of potentially buying both properties, and left with a slightly frustrated sigh and an accrued interest charge for “borrowing” the $10,000 for just an hour and fifteen minutes. No wonder I call them Wells Chargo.

I was at work by 11:30 a.m.

Oh, well. Maybe next year. Maybe I’ll wear shorts next time.