June 01, 2011
One of the strangest rituals in Harford County is making the transition to cyberspace this year: The county's annual tax sale is to be conducted over the Internet on June 20.
The tax sale is a strange bit of business that's hard to understand. Far from the popular image of a sale on the courthouse steps wherein a slippery character is able to procure the family homestead from folks down on their luck for the price of settling a real estate tax debt, the ritual is one that would be better described as bizarre rather than sinister.
Strictly speaking, the tax sale is an auction wherein creditors bid for the right to pay the taxes on properties whose owners haven't settled up. The bids, however, are meaningless. In recent years, when the bidding has opened, the bidders in Harford have raced to shout "max," short for maximum. The auctioneer is left with little choice but to spread among the bidders the right to pay off the taxes on the properties in question, in turn giving the successful bidders a lien against those properties if the owners should try to sell without paying the lienholders back with interest.
No one ever ends up paying the bid price. The successful so-called high bidder simply pays off any taxes due to the county and secures a lien against the land and structures. Many protections are in place to protect the property owner, but when it comes down to it, the high bidder eventually is paid off in the form of being reimbursed for the money spent to settle the tax debt, plus a healthy amount of interest. The rate of the latter is set by the county and is quite high compared to other investments, which is why a whole new class of investors has been spawned to purchase tax liens across the country.
Bidding at the tax sale is a strange way of doing business, but it is as legitimate as any other form of investment. Plus, the system ensures that those of us who do pay our taxes are not burdened with the problems of folks who can't or don't bother.
No longer will this June ritual (June being the end of the local government fiscal year) be conducted by auctioneers banging gavels in front of the courthouse or some other venue, as this year it is to be conducted via the Internet. It's probably just a coincidence that the county moved the tax sale online just months after the County Council building, where the sale has been held for more than a decade, was condemned and declared unfit for occupancy.
Moving online is probably a good direction for the tax sale, as the bidding system that's been in place has been something of an oddity. In all honesty, the auction could well be replaced by a system wherein bidders simply put their names on slips of paper in a hat and someone drew out a name as the successful bidder on each delinquent property.
Or, a computer with a random drawing program would be just as good or better at fairly distributing the wealth, such as it is, among the bidders.
No matter what happens, the tax sale has all the trappings of a government practice that is likely to remain strange for generations to come, no matter how the "sale" is actually conducted.
