Tax Foreclosure Rules

Local government entities can abuse destitute property owners by offering no "excess proceeds" rollback after a tax foreclosure.  A friend identified a situation where an elderly couple with a mid-sized farm was unable to pay their taxes, then the farm was foreclosed upon in a tax auction, and the county kept ALL of the proceeds.

Yes occasionally there are deadbeat property owners, but many owners who fall behind on their property taxes (excessive as they are in New York as we all know) are just down and out and don't need to be punitively punished.

We should seek a policy to limit the amount which the Town of Owego can capture if part of a tax auction foreclosure.  The town should keep the back taxes, plus a small interest charge, plus costs for administrating the foreclosure and tax sale, but NO punitive penalty.  Any amount in excess should flow back to the property owner(s) who were foreclosed upon so they can get their life back together instead of being left flat broke.

August 2019:  Keith Price Jr. and I had this recently published in the Tioga County Courier on this topic-

Government capture of excess proceeds after tax foreclosure is a cannibalistic practice:

Several counties in New York State are having problems with “excess proceeds” abuse. We prefer to call these “rightful proceeds”. If property is sold at auction to pay off back taxes, the municipal entity(s) should only be allowed to retain taxes owed, plus small fees for the foreclosure legal process and for administrating the auction. ALL funds in excess should AUTOMATICALLY be returned to the property owner, in ALL cases.

Yes there might be deadbeat property owners who are capable of paying their taxes, but don’t attempt to do so for some dishonest motive. But if there is policy to qualify who deserves the proceeds and who does not, there is too much potential for government agents to engage in a smear campaign to tarnish the reputation of good people.

Auction steering is another problem which we have to work on. Auctions should be ambitiously advertised, well beyond the legal minimum. Simple policies should enable as many valid bidders as possible, to increase competition and raise the final selling price. Government entities have been known to minimally advertise auctions, then make it difficult to sign up for bidding, so that a favored bidder wins. This lowers the sale price. The destitute prior property owner is then injured by not getting back as many proceeds. If the auction price doesn’t even cover back taxes, which sometimes happens with these situations, then the taxpayers are also injured.

It will also encourage good governing behavior if municipalities and counties are not able to profit from failure. Eliminating the financial benefit from foreclosures, would encourage fewer foreclosures, and we really should try to encourage growth, not destruction.

Keith Price – Libertarian Candidate for Town of Owego Council

Rich Purtell – Libertarian Candidate for Town of Owego Council

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  • Rich Purtell
    commented 2019-03-11 07:16:40 -0400
    Excess proceeds abuse in tax foreclosures is a problem in many parts of New York State and should certainly be a campaign issue for 2019 local government candidates.
    I don’t support punitive fees, ever. If there is some subjective measure used to qualify a property owner as a “deadbeat” in order to hit them with a punitive fine, vs no fine for the owner who came upon legitimate hard times, it is too tempting for a local government entity to tar and feather them all via the media in order to escalate them to a deadbeat status.
    No punitive fees ever. Not even when we are certain the property owner is a deadbeat. That’s the only way to ensure that good people don’t get beat up.
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