ELKHART — Home ownership doesn’t necessarily have to break the bank.
Petronila Corrales bought a home here at a property tax sale for the bargain-basement price of $526, and though plenty of work remains to get it into shape, she’s confident everything will fall into place.
“I invite you to come back in two months and you’ll see that the impossible is possible,” she said, taking a break one recent Saturday from the ongoing renovation efforts at the two-story home.
In fact, a small group of friends and acquaintances, including Corrales, has bought four south-central Elkhart homes between them at county property tax sales. They tout the unorthodox option as a means of attaining home ownership for those without deep pockets and have been spreading the word to others.
“At the very least, I think people should know their options,” said Jason Shenk. He went in with friends in the purchase of one of the four south-central Elkhart homes and has helped Corrales as she renovates and repairs her Cleveland Avenue home.
Shenk quickly adds that purchasing at property tax sales isn’t for everyone. There are plenty of risks involved and additional costs on top of the initial purchase price.
“It’s more work than we expected,” said Shenk, one of many from Prairie Street Mennonite Church who were helping Corrales with her renovation efforts on the recent Saturday. “But we’re also in a home without a mortgage.”
What’s more, purchasing at tax sales, as he sees it, is a means of reclaiming areas impacted by vacancies and high foreclosure rates. Along the way, that helps fight off blight.
“Is it going to be a speculator who comes up with this home or people who want to live here?” he said.
‘A NUMBER OF COMPLEXITIES’
If a homeowner fails to pay property taxes, his or her house will eventually make it to the list of properties put up for auction by the Elkhart County Treasurer’s Office to recoup the overdue funds, usually every fall. Foreclosed homes count among those that can make it to the auction block.
It’s not a simple matter of making a winning bid, writing a check to the treasurer’s office and moving in, though. Homeowners typically have a year from the date of an auction to pay off the back taxes and retain ownership and there are plenty of bureaucratic obstacles the would-be purchasers have to hurdle.
Accordingly, the typical participants at property tax sales are professional investors well-versed in the process, according to Larry Gautsche, president of LaCasa Inc., a nonprofit Goshen-based group. LaCasa offers educational and other programs aimed at promoting home ownership among low-income people.
Buying homes at tax sales “adds a number of complexities,” cautioned Gautsche. “Being well-educated about the process is ever more important.”
Notable, he said, is the year-long wait before property tax auction winners can move into their homes, presuming the original owners don’t pay off the back taxes in the meantime. A lot can happen to the home in that period.
Also, homes on the auction block aren’t usually opened up for inspection ahead of time, so it’s not always apparent what problems they may have.
Typical property tax auction participants are landlords looking for a new property or investors looking to flip cheaply purchased houses for a profit, Gautsche said. Less common are people like Corrales and Shenk, would-be homeowners searching for a low-priced house.
LET THE BUYER BEWARE
Shenk is well aware of the risks, and those in his loosely affiliated group investigated the potential pitfalls ahead of time. They’ve engaged the help of lawyers and other experts when needed, exchanged information among themselves and even compiled a short document highlighting their experiences.
“WARNING: Tax sales are ‘buyer beware’ sales: ‘as is,’ no warranties, no refunds,” the document warns.
Significantly, the spending doesn’t stop with the low price the homes can cost at auction. Corrales, who took ownership of her home earlier this year following her winning $526 bid in a 2010 property tax sale, had to pay $2,170 in back property taxes and still owes $1,500, she said.
Then there are the renovation costs.
The rear of Corrales’ house suffered heavy water damage due to a deteriorating roof, which will necessitate extensive repair work. “I’m afraid of falling,” she said, stepping on a weakened section of the home’s second floor while offering a tour of the place.
Mold is visible on a water-damaged section on the main floor.
Still, Corrales is upbeat. The extra costs are a far cry from the price of a new home and once it’s ready, she won’t have monthly rent or mortgage payments to worry about.
The previous occupants of the house visited once, wishing her good luck and even offering to lend a hand in repairs. Plus, Shenk and others have offered invaluable assistance along the way.
“If people are united, they’ll never be defeated, and I’m not going to be defeated,” Corrales said.