Property tax foreclosure sales now also online

Ever since the original process of bidding on the Courthouse Steps for Tax Sale Foreclosures began, the method of county governments selling properties weighted down with past-due tax liens (foreclosures) has remained the same.

In old-school fashion, people interested in buying up a property at auction, hopefully getting a deal in the process, gathered on the county courthouse steps and waited for the bidding process to begin. In Texas, as in most states, that’s just the way things were done when it came to county property auctions.

Today, however, with the help of the internet, broadband, an auction platform and new software, Auction House (www.auctionhousellc. com) is not only making the auction process easier to access for all interested parties, but it has broadened the market so that Hidalgo County properties up for bid at auction now have more would-be buyers than ever before.

Potential buyers can now bid on county properties for auction no matter where they are physically located. In Hidalgo County online at home or in the office, in person at the courthouse steps, or online from Houston, Miami, Mexico City, or London, for that matter.

Leading the charge into new auction territory is Auction House, with Cory Owens as a principal developer.

“The state of Texas passed legislation in 2015 that changed the process for tax sale foreclosures, which allowed for bidding to take place online,” he said.

At the time, Owens was working in another business sector that relied on the bidding model, so the transition into real properties proved relatively easy.

So far, even though Texas has 254 counties, surprisingly, not many have yet taken advantage of the benefits the new law provides.

“I think many counties are fearful of being completely removed from the auction process, when nothing could be further from the truth,” said Owens.

In fact, Hidalgo County is one of the first counties in Texas to take advantage of the new law passed more than seven years ago.

“We have had success here in Hidalgo County,” said Owens, “because we were able to show the sheriff, the constables, the tax-assessor collectors, and other important county officials who get paid fees for facilitating the bidding process, that for them, very little would change. Indeed, they remain a vital part of the auction process. The Auction House platform takes the County-Courthouse-Steps process and puts it online. It’s as simple as that. It is a process that we refer to as ‘Real-Time Bidding.’

“At Auction House, we are not only helping to make their respective jobs easier with the addition of the online platform and reporting capabilities, but we are able to help the county sell more properties at auction using an entertaining process.”

Like any new technology, though, any new process, the transition can be a bit slow.

“In Texas, with 254 counties, there was the question in the beginning stages– which county is going to be first to try out the new online process,” Owens said. “The common statement with county representatives was, ‘Bring me your first county, we will see how they are doing, and we’ll go from there.’ All wanted to see ‘Proof of Concept’ before moving forward.”

Currently, less than 20 percent of the 254 counties are currently using an online model, according to Owens.

In Hidalgo County, it was in large part, thanks to State Senator Juan “Chuy” Hinojosa, said Owens, that Auction House was introduced to a number of important county officials so that the company would at least have a chance of demonstrating the process.

“That’s when we started making relationships; strong relationships especially within Hidalgo County and surrounding counties.”

Hidalgo County Leads the Way

As with most business sectors, Auction House has competition.

In Texas, Hidalgo County was definitely the first county to take this new auction process out for a request for proposals (RFPs), according to Cory Owens.

“It is a lengthy process, but we responded and so did several other companies. In the end, we won the contract.”

Owens said he thinks what helped Auction House land the Hidalgo County contract was having an open-ended system allowing for change and flexibility, allowing for both 100-percent Online Auctions and Simultaneous Auctions, in addition to being a Texas-based company.

“We are very thankful for winning this contract,” said Owens, “because we can now take the success Hidalgo County is seeing using this process and go show other counties across the state how they may benefit as well if they switch over and add Auction House to their respective tax sale foreclosures.”

Comparing itself to its competitors, Owens said Auction House stands out in many ways.

“We do not limit the potential buyers to the number of auctions they can participate in by the amount of funds they have available. We do not require them to put huge amounts into an escrow account before they can even bid. Our process is simple. We have a onetime $250 pre-authorization, just to keep it safe. And this pre-authorization is determined by the county. So if the bidder violates the county’s rules and regulations, that pre-authorization is enforced; but if not, we automatically release that pre-authorization ($250) back to their account. As a result, this becomes an affordable way to participate in this online auction market.”

According to Owens, the numbers speak for themselves.

“We started in May with Hidalgo County, with the focus of “Proof of Concept,” and our close rate for Hidalgo County alone has been a low of 85 percent and a high of 94 percent, which demonstrates that not only has Auction House demonstrated this “Proof of Concept,” but also stepped ahead with “Proof of Performance.”

Prior to the online process gaining approval from the Texas Legislature and governor in 2015, an average 50- to 60-percent close rate at auction was the norm with the majority of Texas counties, according to Owens. Sometimes even less.

“Many auctions get were getting struck off, allowing for a large backlog,” he said. “While the close rate did increase with the overall online process, even some of the competitors of Auction House can keep the close rate lower than expected due to unfortunate high points of entry for these auctions.” Outside Bidders Help

“We are bringing in these online bidders who were never before able to bid,” Owens said. “Those people, by the way, represent a huge market for counties.”

Plus, Auction House is helping to educate and train those with video training and face-to-face communication. People who have never participated before in county tax sales foreclosures, or those bidders who have been watching but never placing the first foot forward due to fear of the competitors, are now becoming active participants in the auction process. Looking at the process from the outside, it can indeed look daunting, said Owens.

“Prior to launch, we had been interviewing the residents of Hidalgo County for a good three years,” he said. “We’d go to the auctions, and we’d talk to people, and we would notice that while 50 to 60 bidders would show up, maybe less than 10 would bid.”

In an attempt to increase that number, Auction House started asking questions.

“We would approach those bidders and say, ‘Is there something holding you back?’ The constant answer was, ‘I’m trying to get a better understanding of this because it is intimidating bidding face-toface.’” As a result of that helpful feedback, Auction House dedicated its services to leading them through the bidding process so that, in the end, the online process did not appear as intimidating, according to Owens.

“Before launching, that took time, but it paid dividends, and once we went live, the bidders recognized the benefits,” he said.

“Now, we are seeing a number of bidders who would not be classified as your more-experienced bidders, and they are winning in these auctions. It’s because they are learning the process quickly, and they are able to dip their toe in without worrying about the more experienced bidders giving them the intimidating eye.”

The increased geographical scope also can’t be overstated.

“People in Alaska, Maine, or Florida, if interested, can now tune in and bid for property on Auction Day,” said Owens. “You don’t actually have to be a resident of Texas to participate.”

In fact, said Owens, “We have a number of bidders, bidders from Pennsylvania, Nevada, and New Mexico, who are bidding in these auctions and winning.”

Along the way, Auction House also noticed that, in years prior, there was no real record of tracking the number of bidders who were participating in these auctions on the part of the county.

“There was more of a book that they used to keep track of when the bidders went to get their paddles, just to verify that they owed no back taxes within the county,” said Owens. “They carried around a piece of paper with them, Finalized Form 50-307, which showed proof that they owed no back taxes, but once the tax office printed that form out, they did not keep track of it, nor did they keep a copy of it for their records.”

To help improve the process, Auction House has since helped the Hidalgo County Tax Office build what it calls the “user database,” which tracks all the bidders and the bidder IDs.

“We are constantly in communications with the bidders to let them know, ‘Your bidder ID is about to expire, which is only good for 90 days.’ So we will typically let them know 30 days out before it expires, and we’ll send them a new Form 50-307 so they can go get that process started again.”

The real change to the bidding process has to do with the actual bidder.

“That’s where you make changes for the county,” Owens said. “You make sure that when it comes to bidding, they’re not out of pocket a huge amount of money when it comes to that $250 pre-authorization fee, which is automatically released back to them, and that there is protection for the county in addition to added benefits for the bidders and county officials.”

County Protection

Sure, Auction House wants to auction off as many properties as possible, for the benefit of taxpayers, said Owens, but at the same time, it wants to help protect the county, which is providing the service.

“You want the would-be bidder to be able to afford this, but at the same time, you’ve got to protect the county. I think that $250 up front, to be honest with you, is more than reasonable in offering the county some protection, but the protection primarily stems from what our platform is able to offer.”

Owens offers an example of how a bid can go bad.

“Prior to the Online Process, if a bidder comes in and, let’s say, they’re interested in winning an auction for $20,000, but it goes above that mark. What that customer would typically do prior to the online process is keep on bidding until they ended up winning that auction for, let’s say, $35,000.”

So far, so good, but then what?

“Then some might turn around and even though they won that auction, they would say, ‘You know what? I’m not going to pay that auction. I’m going to walk away from it.’” Not good. “Well, in the past, there was no charge against the account. Yes, the law firms did have the ability to go after that customer, but the question is, did they really do that because they wanted to retain the bidders?”

To mitigate that problem, Auction House offers a viable solution.

“What we have done is apply this pre-authorization process to the auction mix, whereby you have the $250 penalty placed against your account, which you lose, but then we have the ability to do a one-, two-, or three-strike rule to where, if we catch you doing this on a constant basis, we can deactivate your account.”

The law firms are also made aware of this if indeed something like that happens.

“Now, however,” said Owens, “we have data to supply them on these auctions and track that bidder history in case we need to offer the win to one of the many next highest bidders.”

“Then, of course, we are in constant communication with the law firms (which are charged with handling the foreclosed tax properties), so if this is happening to them, we can turn around and provide them with a list of who is winning auctions, but not paying for them properly. So really, that $250 should be the least of their concerns.”

In the end, said Owens, everyone benefits.

“The state changed the law in 2015,” he said, “and kudos to Hidalgo County for taking advantage of it. We want other counties to understand that Auction House is much more than a viable option for these Online Tax Sale Foreclosure Auctions.”