No 'irrational' bidding at tax auction

June 04, 1997


Staff Writer

Washington County's tax auction was routine on Tuesday, and in Maryland this year, that's big news.

Auctions of tax-delinquent properties in other counties have been disrupted this year by people bidding tens of millions of dollars on properties assessed at a few thousand dollars.

Frederick County, Md., officials, for instance, canceled their auction on May 13 when bidding hit $55 million for a $31,000 condominium.

But the auction Tuesday on the steps of Washington County Circuit Court drew normal bids. County officials attribute that to the interest rate offered by the county: 6 percent.


"We feel our rate is in line with conditions that prevent irrational bidding," Washington County Treasurer Todd L. Hershey said. "We believe our policy regarding our rate of interest is reasonable."

Counties that offer high interest rates, up to 24 percent, have drawn investors bidding millions of dollars. This allows the investor to make a profit off owners who pay off the debt. For owners who cannot pay, the investor is liable only for the cost of the actual tax bill, not the bid.

"They have no intention of taking the properties," Hershey said.

Hershey said the high rates have attracted bidders from all over the country. He said he has noticed a change even in Washington County in recent years.

"You're not seeing the local neighbor standing here. You have a lot of people from out of town coming here," he said. "People are on the Internet finding out where the next big tax sale is."

Hershey said counties could restore order to their auctions by reducing their interest rates. Tuesday's auction, in fact, had the opposite problem. Most of the bids were low and a few properties were withdrawn when no one bid on them.

"We had very weak bidding," Hershey said.

That's an argument to raise the rates, said Woodrow Barron, who successfully bid on about 15 properties Tuesday.

Barron, who has bid at county auctions for the last four years, said he bids with the hope that the owners will default on properties. Of the 15 or so that he bought Tuesday, he estimated he will actually take possession on only about two or three.

On the rest, he will get his initial investment plus interest back. But since he borrowed the money at 10 percent interest, he will take a loss.

"I don't have thousands of dollars just lying around," he said.

Barron, who lives on Mount Aetna Road. said he would like to see the county offer a higher interest rate so he could break even on properties reclaimed by their owners.

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