DOWNTOWN — Nearly 1,000 people gathered at this year’s Scavenger Sale auction, aiming to nab one of the more than 30,000 local properties up for sale.
The sale is the first step in a complicated process of trying to take over a tax-delinquent property so it can be restored, benefitting its community while returning it to the tax rolls. But many of the lots that go up are snapped up by hedge funds and large institutional buyers, or they stay unused for years, if not decades, while going through the sale again and again.
Officials have made changes to the process, hoping to make the auction more accessible to everyday people. But opinions are split on how the sale can better benefit smaller investors in the future while allowing properties to get redeveloped.
“Why should the scavenger sale property just go into a general pot and then be opened up to the fastest, most aggressive, most well-resourced bidder who gets to the starting line first?” said Michael Davidson, a senior director at the Chicago Community Trust who has worked to make the auction more accessible. “Is there a more equitable way of dealing with properties?”
The sale is “potentially good” because it allows people to buy who might not normally be able to participate, said Myra Penny, a real estate investor who has used the sale since 2017. Penny’s firm plans to develop empty South Shore and Austin lots acquired at the sale.
“Because the amount of money that people would typically need to purchase a property on the market, the Scavenger Sale allows everyday people to buy several properties for a smaller amount,” Penny said.
In practice, few properties make it off the list, with most cycling through the Scavenger Sale for years. If a parcel doesn’t sell in 20 years, it’s forfeited to the state.
In the meantime, the property can be an unused blight on the neighborhood. The majority of such lots are in communities of color that already suffer from disinvestment.
It’s “intolerable” that some properties sit on the list for decades, said Bridget Gainer, a Cook County commissioner and Cook County Land Bank Authority chairwoman.
“Whole neighborhoods are held hostage by the fact that they have to live with vacant housing,” Gainer said.
Changing The Scavenger Sale
The properties up for auction at the Scavenger Sale have severely delinquent taxes. The Treasurer’s Office uses the sale — which has happened every other year since the ’40s — to find new owners for the properties in hopes of getting them back on the tax rolls. The person who places the highest bid is entitled to a tax lien on the property; they must then complete a series of steps to own the deed to the property.
But companies and big investors snap up properties at the auction, leaving out smaller investors. And many properties cycle through the sale again and again, sitting vacant or with unpaid taxes.
Opinions differ on how to change the sale to better benefit smaller investors and communities where the lots are located.
Cook County Treasurer Maria Pappas made it cheaper to participate: In prior years, people who wanted to participate in the sale had to pay a $250 fee to get a hard copy of the enormous spreadsheet that shows which properties would be available. This year, it was available for free with an interactive map on the the Cook County Treasurer’s Office website.
While fewer than than 200 people on average registered for the sale in the past, more than 900 people registered for this year’s sale, which was held over two weeks at the end of February.
This year, the sale was held in person at Navy Pier. Participants waited for hours while paying close attention so they wouldn’t miss the property they wanted to bid on.
The standard starting bid on the properties was $250, but some went for tens of thousands — and a few saw bids go past $100,000.
Steven Vance, an urban planner and founder and CEO of real estate database Chicago Cityscape, said he saw two bidders who waited for hours — only to quickly lose when the property they were interested in came up.
“They just sat there for hours to get nothing,” Vance said.
The next time the sale is held, in 2024, it’ll be done all online. Some housing advocates have said they fear that will make it easier for hedge funds and investment corporations to cash in on homeowner woes.
But Vance and Davidson said holding the auction online could level the playing field.
“If it’s done well and if it remains accessible, it sounds to me like it brings enormous efficiency to a process that seems like it’s operating in the Dark Ages,” Vance said.
This year, Vance and Davidson developed a Zillow-like tool so people could see what’d be up for sale at the auction, hoping that’d help smaller buyers.
“The Scavenger Sale is really not working effectively from a community development point of view for the residents of Cook County,” Davidson said. “I think [the way it is now] weeds out the mom-and-pops and the community scale developers. The only participants who have the wherewithal and the time to participate under those conditions are these large institutional purchasers.”
Davidson said he hopes there will be a way for community organizations to get priority consideration in the future.
Anton Seals, lead steward of Grow Greater Englewood and a co-founder of the Englewood Community Land Trust, said the issue with the way the system works now is “investors come in and try to take advantage of the depressed value of real estate, but neighborhoods with a lot of Scavenger Sale parcels are the product of failed public policies,” like the legacies of contract lending, redlining and unequal tax assessment.
More creative solutions, like using land banks that redevelop abandoned properties, are needed to address this issue, Seals said.
But that idea is contentious: County Treasurer Pappas said government entities like the Cook County Land Bank Authority get an unfair advantage over private bidders since they can place no-cash bids on properties at the Scavenger Sale. For a private bidder to win over the land bank, they have to pay the entire amount of delinquent taxes due on a property plus $100, Pappas said.
“Why should the Land Bank have this much of an upper hand?” Pappas said.
Throughout the auction, Pappas handed out surveys asking bidders if a property they wanted to bid on was taken by the Land Bank. The Treasure’s Office will use that data to lobby for change in Springfield and in the county, she said.
The Cook County Land Bank Authority acquires vacant and abandoned properties, helping to redevelop them to stabilize neighborhoods and stimulate the local economy.
The authority is “really just a hack for a broken system,” Gainer said.
In 2015, the Cook County Land Bank Authority made the Scavenger Sale its primary means of acquiring properties, scooping up about 27,000 parcels of the approximately 96,000 cumulative properties since then. It’s returned more than 9,000 of those properties onto the county rolls — only to re-acquire 353 of those properties again, according to the Treasurer’s Office.
The result has been to deprive private bidders of the opportunity to nab the properties themselves, Pappas said.
But Gainer said there’s several reasons why that happens, including times when the authority has let go of properties if it finds out someone lives there.
“One of the myths that the land bank was able to dispel is that the reason why so many properties sit on the scavenger sale is because there’s no market for them,” Gainer said. “We’ve proven 1,000 times over that there’s a market in these communities.”
One of the issues with that system is that the government has “made the wall too high” for people who buy at the scavenger sale to actually acquire the property, Gainer said. A bidder has to wait two and a half years before they can get the title to the deed, and the process involves dozens of steps, including appraisals, inspections and court appearances.
In mid-February, the Land Bank celebrated its 1,000th renovated home. The Garfield Park house, once abandoned and vacant for years, was made over by a developer who partners with the land bank.
“We’ve proven that the work can be done by local developers,” Gainer said. “You don’t need to be subsidized. You don’t need any kind of special care in bidding. What you need to do is make the process actually workable.”
Listen to “It’s All Good: A Block Club Chicago Podcast”: