Vancouver real estate bargains for sale, with a catch
Published Thursday, November 12, 2015 10:28AM EST
Last Updated Thursday, November 12, 2015 10:38AM EST
The real estate market in Metro Vancouver is one of the tightest in the country, with many more prospective homebuyers than properties up for sale.So it may surprise some to learn that every November, the city simply auctions off homes to the highest bidder.
The auction is called a tax sale, an event in which the city takes over ownership of properties with three years of unpaid property taxes and put them up for sale.
This year, 18 homes and businesses owing a total of $600,000 in back taxes are up for bids. Bidding on these properties begins at the “upset price,” which is the total of the longest overdue taxes plus interest. That means opening bids are often just a fraction of the property’s market value.
A business on East Broadway valued at $2.1 million is up for an opening bid of just over $24,000. A home valued at $616,000 on a quiet street in the neighbourhood of Strathcona could go for as little as $3,300.
CTV British Columbia’s Sarah MacDonald tried knocking on the doors of several of these properties and found that many of them appeared to be sitting empty.
University of British Columbia urban economics professor Tsur Somerville tells CTV that, while many people haven’t heard of city-run tax sales, they are actually quite common across Canada and elsewhere around the world.
But the sales are not great place to pick up a new place to live; in fact, they are geared more toward investors. That’s because it’s rare for a bidder to actually take over ownership of the building. The sales are really more of a way to incentivize homeowners to pay off their taxes.
The current owners, or “registered charge holders” of the properties up for sale, have one year after the tax sale to “redeem” the property by paying off the money they owe the city. When that happens, the owners can get their properties back.
Although the successful bidders lose the property, not only do they get their deposit back, the city will also pay them a healthy six per cent interest. So, many of those who bid at the auctions are looking for that healthy return on investment rather than the property.
Of course, if the property is not redeemed, it is transferred to the new owner, who can then place the home or business up for sale and take their chances on the real estate market instead.
With a report from CTV Vancouver’s Sarah MacDonald