Each year the municipal government act, part 10 section 8 (linked below) requires an auction to sell properties with tax arrears owing.
http://www.canlii.org/en/ab/laws/stat/rsa-2000-c-m-26/latest/rsa-2000-c-m-26.html#Division_8_Recovery_of_Taxes_Related_to_Land_676048
I’ve reviewed this act and it is very peculiar because it shows a lack of common sense regarding how the market for property works. Essentially the act requires the city to set a reserve bid that is the ‘retail’ value of the property. The problem with these arrears list properties is they are not retail ready, they are distressed and nobody buys this type of property for full value. There must be a discount provided as a mechanism for the buyer to be compensated for the risk of buying a property that cannot be inspected.
not only is an auction buyer supposed to pay retail (according to the act), he’s also got to pay the back taxes and in some cases he’d owe the gst on top of the purchase price. How many bidders will there be for a property where the buyer needs to pay more than the fair value and won’t know what the interior condition is?
I do wonder how many bids are received at this annual event and I’ve always been intrigued to observe it. The cash settlement requirements are pretty onerous as well, you’d have to pay up 1/3 of the price the day of the sale and the balance in a month. That is a really tough hurdle and again shows how out of touch the act is.
Another issue that isn’t clear is how unbid properties are dealt with. Given the low likelihood of any bidders due to the high reserve, it seems that the city can take possession of the property after the auction. It then can sell it and distribute the proceeds. The city also has fees and bills 5% of the selling price to the owner as an administration fee. Allowing your property to go to auction is a terrible form of stewardship of your affairs. I’m amazed that some of these houses on the 2020 list are not on the mls for sale at attractive prices to allow the owner to recoup as much of the equity as possible. Upon completion of the auction the owner will take a big haircut based on marketing costs and city fees.
The act should have a lower or no reserve to increase the odds of the property selling at the auction and allow a reasonable discount to be granted to the buyer who’s taking on a potentially risky deal. I’m assuming if the property doesn’t sell the city then takes possession and hires its own realtors to list it, again at the market price. But at this stage they can discount it each month until it sells.