Los Angeles County Tax Defaulted Property Sale

I attended the Los Angeles County Tax Defaulted Properties auction on Feb 14 and 15, 2005. After speaking to at least 20 different people during one of the breaks, we all came to the conclusion that there are just too many pitfalls along the way. Many people give seminars and write books on how to make money at these, given the illusion that the property could sell at the minimum bid, typically less than $10K. This might be true, but they NEVER sell for that low amount. With nearly 2,000 people bidding on 475 properties, competition was fierce and at most times, foolish. If you won a property during these 2 days, you were NOT necessarily a winner. After having researched a vast number of properties, I now know that all sold for well past retail/market value (typically 10-30 times the minimum bid). I can’t understand why people refuse to walk away from a bad deal like this other than to “save face”. I assume it is more like frenzied impulse buying. Since you went to all the effort of submitting your application, paying the $1000 refundable entrance fee and researching properties, you might as well buy something right? This is simply not smart. Only 7 properties had improvements on them and were by far the most popular. The only way to win those was to overbid. At best, you now own a parcel in need of serious rehab with questionable title. At worst you invested in a parcel sliver or river bed, or worse, a contaminated superfund site which YOU are responsible for cleaning up. You may also be buying a lawsuit against you from the previous owner. Even if you do wait the 1 year after the sale, you can still be sued and lose. If the plaintiff can show intent to defraud (which isn’t likely) or negligence on the county’s part (which IS likely, I found court cases where the sale was rescinded even after the first year of waiting), you are now stuck with attorney’s fees for your defense, usually $30K or so. Things that seem too good to be true usually are, in this case especially. I did learn about the very efficient process to collect back taxes, met some very nice people, and it was pretty exciting bidding on that vacant parcel in Malibu. As it turns out, it sold for $100K more than I was willing to pay and would have been tough to turn a profit at that high a price.
The people there were such a mixed crowd; retirees that looked like they were in Vegas playing Keno; the old couple next to me picking out properties from the book right then and there without doing any research other than liking the legal description; the young middle-eastern “kids” that must have bought 50 parcels in Northern LA county near Palmdale; the professional bottom feeders that would evict their own grandmothers if it meant turning a profit; the typical waspy middle age worker trying to buy a lot to park his boat.
This is NOT the place to go searching for a quick profit. It would be a waste of time to return. I know there are people out there who would believe that they have what it takes to find a diamond in the rough at one of these auctions, but those are the same people that keep playing the lottery.
On a side note, I did notice several groups of people that looked like they would be willing to sell you narcotics. After eavesdropping, I realized why they were there; they had some huge amounts of money to get rid of and nowhere to spend it. These auctions are one of the only places where large cash transactions are not only required, but would not raise suspicions. I assume they buy as many parcels as they can, sell as soon as they can, and the money is clean. It is the ideal money laundering service, all brought to you by the county. I certainly hope the tax collector shares the registration information with the Sheriff’s office, but I doubt it.
In less densely populated, perhaps less expensive areas, tax auctions may be a good place to earn money, but in Southern California this is simply not the case. The good news is that the Tax default book was only $25, parking was $12 for 2 days, the $1000 deposit will be refunded to me in a month and the rest was only my time so it was a cheap lesson. Admission is free if you want to check it out, but again, you would probably have better luck in another part of California. I would recommend bringing your own food and drink since food sales were inadequate as were the number of available bathrooms (I used the Sheraton Suites hotel in the same parking lot)
Best of luck to all…