Homeowners left Homeless: Shelby County owns more tax sale properties than any investor

Published: Sep. 20, 2022 at 4:52 PM CDT
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MEMPHIS, Tenn. (WMC) - Archie Robinson nearly lost his home when it was sold to an investor in a tax sale, but research by The Investigators show most properties sold in Shelby County tax sales aren’t purchased by investors, but by the county itself.

When Robinson moved into the childhood home he inherited from his mother, he also took her tax debt.

“They told me the taxes were behind so I said ‘OK, let me catch up,’” Robinson said.

Robinson’s mom owed thousands in property taxes, so he paid what he could to preserve his home and all the memories inside. When the back taxes totaled nearly $5,000, his home was put up for auction.

In Tennessee, a trustee can take possession of someone’s property and sell it to recoup unpaid property taxes in what’s called a tax sale. Robinson’s home was one of nearly 400 properties that were sold in February 2021.

Red Door Memphis, a property management company, purchased Robinson’s home and four others in that tax sale.

Red Door, which states its mission is to “glorify God by providing good housing at a good value”, asked the court to evict Robinson.

“Some young lady served me some papers stating that someone had bought the home and why was I here? And who was I?” said Robinson.

Robinson borrowed money to buy back his property while another home that Red Door purchased in that tax sale was listed for rent on its website for $1,500 a month.

According to Andrew Kahrl, a professor of History and African American studies at the University of Virginia, investors profit most from tax sales.

“There’s a lot of evidence to show that tax sales have become a predatory marketplace for investors looking to profit off of homeowner distress,” he said.

That may be the case, but Action News 5 found most properties sold in Shelby County tax sales aren’t purchased by investors, but are acquired by Shelby County itself.

“That’s showing you the system’s not working,” Kahrl said.

An analysis done with the Institute for Public Service Reporting shows of more than 8,000 properties sold in tax sales between 2016 and 2022, Shelby County came to own more than 5,500 of them - nearly 70%.

“A lot of these are what you call distressed properties - either a house that’s not in great shape or a vacant lot, and there’s just not enough investors who want to buy all those,” said Jack Turner, who litigated tax delinquency cases for the Shelby County Trustee’s Office until this past spring. “A lot of investors feel there are better investment opportunities outside of a tax sale.”

The goal of a tax sale is to recoup unpaid property taxes, but Action News 5 found the county recovers only a fraction of the property taxes it’s owed.

For example, a trustee’s report suggests there were nearly $7 million in bids for the August 2020 tax sale.

A separate report shows Shelby County recovered less than $800,000 in back taxes for that sale. 40 properties were purchased by individuals while Shelby County was forced to take over the remaining 200 or so properties that were left.

Rather than paying money for the tax-foreclosed properties it comes to own, Shelby County instead wipes the tax slate clean and moves the properties to the Shelby County Land Bank, where potential owners from around the world can buy Memphis real estate online.

“The land bank tries to sell them as best they can,” said Turner. “I can just tell you my experience being there: the goal is to get taxes paid so county services can be provided.”

According to data released by the Land Bank, the county has generated between $2.2 million and $5.3 million in revenue in each of the last five years through third-party sales of properties the county has taken in tax sales.

It was unclear, however, how much the previous owners had owed in unpaid property taxes on those properties.

The Trustee’s Office can’t profit from a tax sale, but it can earn money for the county on any excess funds it accumulates when the Land Bank in turn sells tax-foreclosed properties to third parties.

Action News 5 found several properties in the Land Bank that sold for a lot less than the taxes owed.

For example, a lot on Davis Street that carried more than $19,000 in back taxes failed to sell in the August 2020 auction. It was purchased 10 months later by a Florida-based limited-liability company from the Land Bank for just $500.

Turner points out one silver lining: Shelby County doesn’t evict, while investors can.

Robinson feels lucky to have redeemed his childhood home before the eviction went through, but between interest and fees, he had to pay more than just the taxes he owed.

“I feel cheated. I really do.”

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