When problematic properties don't sell, the Bay County Land Bank Authority steps in

Since its creation over two decades ago, the Bay County Land Bank Authority has been able to resolve many complex property situations in Bay County and encourage the renovation of dilapidated, problematic homes, returning them to a safe, livable state.

Former Bay County Treasurer Richard Brzezinski began the Land Bank in September of 2009 to deal with unique property circumstances in the county. Shawna Walraven, the current Bay County treasurer, has overseen the Land Bank Authority as chair since 2019, working directly with a seven-member board of directors.

Bay County Treasurer Shawna WalravenLocally, the Land Bank remains a bit of an unknown or misunderstood entity. Often confused with public tax auction, the process for obtaining properties that are owned by the Land Bank Authority is unique, as well as the criteria for sale. “Properties that come to the Land Bank are usually in the following areas: in need of environmental remediation, voluntary acquisitions, or opportunities for development,” Walraven says.

The process by which a property becomes part of the Land Bank is a complicated one. As the foreclosing governmental unit, the Bay County Treasurer forecloses on properties that have at least three years of delinquent taxes. Before a foreclosed property makes its way to the Land Bank, it first must go to public auction.

According to Walraven, to obtain a property at public auction, the minimum bid must cover the amount of delinquent taxes, in addition to any additional cost the county has incurred while maintaining the property.  If it does not sell at the first public auction, a property will then move to a second auction where the minimum bid is $100, all in accordance with the General Property Tax Act in Michigan. This year’s first public auction will be on Aug. 27 and will be completely online at tax-sale.info. The second auction will be in the fall.

Most properties that the Land Bank purchases are those leftover from tax auction.  

Currently, the Land Bank does not have any available properties. Walraven explains that the goal is always to sell foreclosed properties at public auction. In 2020, not a single property was left after the public auctions.

“We’re not in the position of trying to compete with small scale developers in our community, people who want to make a difference, people who want to redevelop homes. We aren’t trying to compete with them. If properties are able to be sold and developed in a meaningful way on their own, we’re not going to get involved.”

Walraven adds, “Property has been selling. And that’s good, right? It’s good to have local people in their communities investing in their own communities. Where we get involved is when properties are not selling, and there is a reason.”  When the liability or cost of remediation is too high, some properties sit, regardless of how low the price may go, and these are the special situations where the Land Bank can step in and purchase the property.

One of these unique situations was a property at 103 W. Elm St. in Auburn.  Regardless of how low the price dipped, the home sat unsold through both auctions due to its condemned status and the cost of demolition. The Land Bank Authority teamed with the City of Auburn to then split the $12,000 demolition bill. Afterward, the property was sold for future development.

This home was in such disrepair that it didn't sell on the open market or at an auction. But the Bay County Land Bank Authority worked with new owner Scott Oswald to turn it into a use-able home for a family. (Photo courtesy of Scott Oswald)In another instance, Scott Oswald purchased a home from the land bank at 1704 S. Sherman St. After finding out that the property was available, Oswald had to put a proposal together to renovate the property and make it livable. “I had to show how much money it would cost and everything I would need for it.”

Walraven explains that this is a normal part of obtaining a property from the Land Bank. After a property is offered for sale publicly and bids are taken, the board will then evaluate all offers. “Price is only one factor. Land Bank can look at things outside of just price. We look at four criteria: sustainability of the project, feasibility of the project, fit with the neighborhood, and finally price.”

While under a development agreement with the Land Bank, Oswald had to be sure everything was up to code and in compliance as he renovated. When he ran into a roadblock with utilities, the board was happy to give him an extension. “It was kind of scary because I had $15,000 to $20,000 into the thing. But the board was more than willing to help and give me an extension for as long as I needed. It took me 18 months with all the delays I had dealing with other entities.”

“When I bought it, it was a 22-by-22-foot home. It was basically a garage that had been converted into a one-bedroom house. I dug down up underneath the whole house and put a foundation under what was there, and I added another 22 by 22 feet to it, making it a three-bedroom, single bath home. I put in big open ceilings.” Oswald did all of the work himself, including the foundation and the addition.

Homes that the Bay County Land Bank Authority sells typically have substantial problems. This one had to be torn that the Bay County Land Bank Authority sells typically have substantial problems. (Photo courtesy of the Bay County Land Bank Authority)Oswald decided to sell last year during the pandemic. “The next door neighbor had an 80-year-old sister who wanted to live by her, so I sold it for less than market value. But it was a labor of love for me more than anything. It was a great experience to be able to hand something over to someone else in the end.”

“I would do it again, but for a different purpose. I would do it to help more people rather than just to gain knowledge. I would like to help other people out if there was something out there.”

Though the Land Bank does not maintain a large stock of homes, they are ready and waiting when the situation calls for it. “Saginaw and Genesee counties have much bigger issues with vacant or abandoned properties than we do in Bay, thankfully, but we want to be proactive and preventative about that. As we have these vacant and abandoned properties, the Land Bank wants to be active in making sure we are addressing these situations and not allowing the problem to become bigger than it is.”

“Funding is the Land Bank’s largest hurdle.” The Land Bank uses a funding mechanism called the 5/50 tax capture, allowing 50% of the property tax for the first five years to be captured by the Land Bank after transfer. In theory this would create a revolving stream of income for the Land Bank. “However, it has not generated enough revenue to be a substantial source of funding.”  

Walraven continues to seek new sources of funding and partnerships to help deal with this issue, similar to the partnership with Auburn.

Walraven acknowledges that while the Land Bank is important, it is only a piece of the puzzle. “It can be an important tool to prepare properties for redevelopment opportunities, but it is one part of an entire toolbox to improve our community, including our housing supply. We are a unique tool for the right set of circumstances.”

 
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