Guilford County To Foreclose On Hundreds of Homeowners
In the past, Guilford County has rarely foreclosed on homes owned by those delinquent on their property taxes, but the county has now begun a mass foreclosure proceeding on about 500 houses for which back taxes are owed.
The Guilford County Tax Department has handed over a list of the 500 houses to be foreclosed on to a Greensboro real estate attorney that the county has hired to oversee the effort. According to county officials, the county lacks the staff and the expertise to handle such a widespread foreclosure effort without outside help.
Guilford County Tax Director Ben Chavis said that foreclosing on homes of county residents has always been a collection method of last resort – one that’s rarely been used in the past in Guilford County, but he added that something needed to be done to get the county’s property tax collection rate back up after that rate dropped in recent years. The drop was due to a number of factors including a high unemployment rate, declining home values and the dismal economy in the aftermath of the 2008 financial crisis.
Chavis said his department had given the homeowners on the list every opportunity to pay, and the delinquent taxes on those houses have accumulated for years.
“Unfortunately, we’ve gotten to where we have to use alternatives of last resort,” Chavis said. “Our collection percentage has suffered some for several years, and I had to ask, ‘What do I do to get it back up to 99 percent?’ It’s a daunting task.”
Chavis said he can’t speak for previous Guilford County tax directors as to why the department almost never used home foreclosures to collect taxes, but he said one reason, no doubt, is that foreclosure is a complicated legal proceeding that only comes at the end of a long line of attempts to collect the taxes by other means.
Former Guilford County Tax Director Francis Kinlaw, who was tax director immediately before Chavis, said that in his years as director it was highly unusual for the county to foreclose on property. He said that the foreclosure process was complex and often drawn out, and not worth the return in most cases. He said that, toward the end of his time as tax director, about five years ago, he was already starting to see a downward pressure on the tax collection rate, but the time and cost of foreclosing on property wasn’t worth taking that action.
Kinlaw said that at that time the Tax Department did not have a policy on when to foreclose and it was instead a judgment call by the tax director and staff.
Chavis became Guilford County’s tax director about four years ago, and he said that, during that time, the Tax Department has made every attempt to work with struggling homeowners to get the taxes paid and avoid foreclosures. However, he added, after several years of non-payment, the county is left with little choice.
“The policy we currently have in place,” Chavis said, “is that if it’s been three years in arrears with no movement, and you haven’t made any payments – then it’s being turned over to the attorney.”
According to Chavis, he and his staff need to use all of the legal means at their disposal to collect taxes. That way, he said, those who pay their taxes in full each year won’t be burdened by the revenue shortfall created by those who haven’t.
“You’ve got to be fair to everyone else who is paying their taxes,” Chavis said.
The attorney overseeing the foreclosures is Jerry Weston, with Greensboro-based Gabriel Berry Weston & Wells. Weston specializes in residential real estate matters and probate law and will be paid a fee on a per foreclosure basis.
The Guilford County Property Management Department doesn’t have much experience selling residential real estate and it isn’t equipped to take on the coming influx of houses. Property management officials are bracing for the hundreds of foreclosed homes that Guilford County will have in its possession after it takes over the property from delinquent taxpayers.
The Property Management Department has unfilled positions, and two very long-term employees who both served as director of the department have both retired in recent years – David Grantham and Sandy Woodard.
Alex Ashton, who now has several duties in the Property Management Department, said his department has been told to prepare for what Ashton calls “a flood” of foreclosed houses that the county will have on its hands courtesy of the Tax Department’s new collection efforts.
Ashton said the Property Management Department will be seeking “some direction” on what to do with the property.
That direction is expected to come from the Guilford County Board of Commissioners and Guilford County Manager Marty Lawing.
Guilford County currently has seven houses in its possession that it has acquired as a result of foreclosures. In addition, the county has some vacant lots and small properties that are of no interest to buyers for one reason or another.
Delaine Poteat, the interim director of the Property Management Department, said Guilford County has about 40 pieces of “surplus property” on its books that it has accumulated over the last several decades. According to Poteat, about half those were acquired by the county through foreclosures in 2013.
Along with the hundreds of houses that may be in the county’s possession soon, Guilford County is going to have to figure out what to do with that property.
Poteat said some of the property being held by Guilford County has been on the county’s books since the ’70s, and much of it is unmarketable or highly undesirable for one reason or another. Two of those parcels, for instance, are narrow 6-foot and 10-foot strips of land that are too small for any use.
Currently, Guilford County has only one property listed for sale on its website: a vacant lot zoned commercial at 506 Battleground Ave. According to Poteat, that lot is now under contract with a buyer for $288,800. That means, according to the website, the county currently has no property for sale – though it does hold property it wants to get rid of and it is about to have a lot more property on its hands once the foreclosures are complete.
“Right now we haven’t done any advertising for most of them,” Poteat said. “It’s not on the website or anything.”
Ashton said that occasionally his department has handled residential houses but those instances have been rare.
“We’ve put out some for sale signs in the past,” he said, adding that his department isn’t geared toward selling residential real estate. The department usually handles the contracts for the purchase of the county’s buildings, parks, open space and other property that rarely involves residential property. It also oversees the sale of the county’s property from time to time.
Guilford County Attorney Mark Payne said that some of the houses the county is about to foreclose on may be way “underwater,” and some owners, he said, have already “walked away.” He also said that, in some cases, property owners who are subject to foreclosure might find an 11th-hour financial solution to pay their back taxes and halt the process.
Chavis said that, when the county is unable to sell houses and buildings that are within the Greensboro city limits, the city acts as a buyer of last resort; if there’s no bidder, the City of Greensboro takes it off the county’s hands.
“If nobody bids on the property, the City of Greensboro will protect their interests,” Chavis said. “They will bid if no one else bids.”
Chavis said that, if the property is in a state of disrepair and not fit to sell, the City of Greensboro takes it and fixes it up and makes it marketable.
“They do a good job at that,” he said. “It’s good for us.”
The city has done that with the occasional foreclosed property the county has acquired, but the city might be more reluctant to take on the large influx of houses that’s expected to come in the new wave of foreclosures.
The tax director said that, while the City of Greensboro has been willing in the past to take the property off the county’s hands, that hasn’t been the case with the City of High Point.
“Unfortunately we don’t have that agreement with High Point,” Chavis said, adding that that’s the reason the vast majority of property the county has had on its books for a long time is in High Point.
Chavis said Guilford County cannot let the collection efforts linger too long because eventually the county will lose its ability to collect those back taxes.
He said the statute of limitations for collecting taxes on property is 10 years.
“You can collect them after 10 years, but you cannot use enforcement remedies, garnishment of wages or attaching bank accounts or foreclosure,” he said. “It essentially becomes voluntary payment at that point.”
According to Chavis, it is to Guilford County’s advantage to sell the property quickly after it acquires it through foreclosure, because, when property is held by the county, Guilford County isn’t getting any tax revenue from it, as the county does once the property is in the hands of new owners.
BY Scott D. Yost
February 13, 2014
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