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Deal-seeking rookies learn land auction lessons

By GREG HAMILTON
Published May 8, 2005

The parcel was in play, and the sharks were starting to circle.

The modest lot in Citrus Springs, all quarter-acre's worth, carried a value on the tax roll of $2,700. When the out-of-state owners failed to pay the taxes, someone else stepped in to do so, buying the tax certificate with the goal of making a small profit when the lot eventually was sold.

That path led the parcel to the Citrus County Courthouse for Wednesday's tax deed auction, one of those little-noticed government processes that is advertised in tiny print deep inside newspapers.

That is, they used to be under the radar. With the red-hot real estate market catching everyone's attention, it was only a matter of time before more ordinary citizens caught on to these government-run property auctions as a possible low-cost ticket onto the gravy train.

Typically the playground of more serious investors, those who have ready access to the thousands of dollars winning bidders must produce immediately to claim their deeds, the small room at the courthouse was filled with nearly 60 Donald Trump wanna-bes for the auction.

But once the bidding started, the old hands quickly began to school the novices.

The minimum bid set by the Clerk of Courts official running the auction was $1,500, the delinquent tax amount plus other charges. This let the newbies think they might have a shot at a bargain.

Those dreams began to drift away as the first bid topped $5,000, and they vanished altogether when the bid reached $10,000. The action blew past $12,000, then $13,000, then $15,000 before settling in at $18,000.

As the newcomers set down their bright blue bidders' paddles, the sharks began a series of curious maneuvers, engaging in a much-practiced circling of each other.

One man called out a bid of $18,100, only to be countered by another at $18,200. Someone else barked out $18,300 and so on to $19,000. Moments later, the bid was $20,000 and all but the most determined players had bowed out.

"Twenty-thousand and 10 dollars," a fellow in the back row offered. "Twenty-thousand and 20 dollars," came a reply from the left side. "Twenty-thousand and 30 dollars," fired another back-bencher.

Round and round they went for 10 minutes, each raising the bid an increment, conscious that the higher the price, the lower their potential profit from reselling the property.

And that, after all, is the name of the game.

While some at the auction may have targeted a specific parcel for their own use, the more common goal was to win the property, get a clear title, then sell it during this runaway real estate market. It's the classic economic game plan: Buy low, sell high.

How low? How high?

"Six months ago, these lots were going for $9,000," said Edward Krygeris, one of the regulars at the courthouse auctions. "They're selling on the market now for about $29,000."

Krygeris was at Wednesday's auction almost on a whim. He was on his way from his Vero Beach home to a getaway condo in Cedar Key and decided to stop by for some bargain hunting.

Wearing a knit shirt, denim shorts and sneakers, he looked up from his copy of USA Today to do a bit of handicapping of the players. "There are four or five guys here who are not going to run out of money," Krygeris said, pointing out the serious investors and predicting their strategies.

Sure enough, the duel dwindled to four determined souls, then two: The back-bench fellow and the "and 10" guy, who bumped each bid by 10 bucks. Finally, at $21,100, the back-bench bidder won the deed. Krygeris estimated the parcel would fetch about $28,000 on today's market.

"He has to go for the next two," Krygeris said, as the auction moved to the next lot. "They're right next door to each other."

Once again, the bidding began low and quickly rose to the $20,000 range. Mr. Back-bencher, bidder No. 32, deftly danced with two other bidders until he snagged his second deed.

It was a foregone conclusion that he would go for the three-peat. He did. And he won.

For the rookies in the room, the bidding ballet was an eye-opener.

Tom Boling of Inverness called his first auction a learning experience.

"I have limited funds and I was just looking for a bargain," he said. "I wanted to see how the process works."

Boling had done his homework, researching online the properties and the rules of the auction (www.clerk.citrus.fl.us) He visited those parcels that caught his attention. He's bought a computer program that lists counties around the country that hold such auctions. He's hoping to get in on the real estate game.

He left the auction empty-handed.

"I was hoping for a deal, but they were going for almost full price," he said.

Boling, at least, was on the right path, Krygeris said.

"A lot of people make the mistake of not doing any research on the properties," he said. "You can get really hurt."

A common pitfall is not knowing that there are liens on the title. Those are always bad, although some liens are worse than others. "A child support lien," Krygeris said, "that's a nasty one."

And not all properties are created equal.

"All of these lots (at Wednesday's auction) are essentially the same size," Krygeris said, "but some could be near power lines, some are closer to where construction is occurring."

Next up was a property in the Inverness Highlands, the only parcel on the list not in Citrus Springs. This one seemed to be the best chance for the novices to get into the game.

"Watch the paddles go up," Krygeris whispered.

The bidding was brisk, but in the lower ranges. Three people bobbed and weaved, their voices betraying growing levels of competitiveness and exasperation. The winning bid barely topped $15,000 for a parcel that Krygeris estimated would sell for $18,000.

"It's the human condition," he said of the edginess of the last tug-of-war. "It's the emotion of the sale."

A bidder may go home grumbling that she would have gotten the property a lot cheaper had a competing buyer not driven up the price, Krygeris said. "But what she doesn't know is that there could be someone like me in the back, just waiting to jump in at the last minute" and snatch up the prize with a monster bid.

And so the auction went, an hour of spirited capitalism pitting folks who make their living wheeling and dealing against a number of dreamers hoping to catch a ride on the real estate express.

All of them were drawn to the tax deed auction for the same reason that people flock to garage sales and flea markets: A chance to bag a bargain. "It's the TJ Maxx method of buying land and real estate," Krygeris said. "Leftovers and discounted prices."

[Last modified May 8, 2005, 00:45:19]