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Making a silo your castle
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October 14, 1999: 6:27 a.m. ET
Government sales can offer unusual homes -- at a reasonable price
By Staff Writer Nicole Jacoby
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NEW YORK (CNNfn) - Ever dreamed of living in a lighthouse? What about owning your own silo or even a military base?
These and hundreds of other more ordinary properties are put up for sale by the U.S. government each year. And while many of these one-of-a-kind properties may be beyond your means, you might end up with a home that is anything but ordinary.
"These can be interesting properties," said Ron Rice, director of program development and outreach at the Office of Property Disposal. "They have a history and there are some good values. And there can be some very hot properties in terms of location."
But like public auctions for cars and other surplus items, government property auctions rarely yield the basement bargains purported by some urban legends -- though you may benefit in other ways.
Government surplus
While several departments run their own property auctions, the majority of government-owned real estate sales go through the Office of Property Disposal (OPD).
The OPD makes real estate available to the public only when no other government use can be found for it -- even outside the agency the property originated in. In some cases, property will be transferred from one agency to another or is put to use as a park, national monument or library.
Once all these possibilities are exhausted, the surplus property is put up for public sale, either through an auction or public real estate listing.
The listings are diverse.
"It runs the gamut," said the OPD's Rice. "It really is hard to generalize because there are so many different types of properties." Some of the unique items include lighthouses, silos, military bases and forest ranger homes.
While residential properties rarely make the OPD's sale list, offices, industrial plants and other commercial properties that may be attractive to small business owners commonly do.
These properties can be good deals -- but not necessarily because of their price.
"We don't want the public to have the impression that there are any fire sales here," Rice said. The government generally is looking for fair market value when it sells surplus properties.
But this type of real estate often has other value-added features.
"A lot of these properties are in exactly the right place or their construction is unusual. It might be a historic building or a substantial former government building," said Rice.
Last year alone, the OPD sold more than 1,600 properties valued at more than $350 million.
Other government agencies that put real estate up for sale include the Federal Deposit Insurance Corp. and the Department of Housing and Urban Development.
Buying seized property
Real estate seized and resold by the government can be among the most interesting and -- unlike property auctioned off by the OPD -- among the most practical, since it consists primarily of residential buildings.
"Just about anything is available, from single-family homes to apartment buildings," said Wendy Wilson, director of marketing and sales for EG&G, the Fairfax-Va.-based government contractor responsible for selling the bulk of the government's seized properties.
EG&G works with the Treasury Department, unloading properties seized by the Internal Revenue Service, the Secret Service, the Bureau of Alcohol, Tobacco and Firearms and U.S. Customs Service. Proceeds of the sales go to Department of Treasury Asset Forfeiture Fund, which supports the agency's crime-fighting efforts.
Because many of these properties have been appropriated from drug traffickers, money launderers and other wealthy criminals, they can be rather distinctive.
"Some of them are quite luxurious, since they are seized from the types of people who have a lot to spend on renovating and upkeep," Wilson said. "But sometimes it's just your average home."
The prices on these homes vary, but good deals are not uncommon.
"It depends on where the property is located and who attends the auction," Wilson said. Properties might be sold for anywhere between 50 percent to 100 percent of their market value.
To find out about property auctions in your area, check the classified ads of your local newspaper. The Treasury Department Web site also has information on upcoming sales, or you can call its telephone hot line at (703) 273-7373.
Be sure to check out the property for sale at its open house, which usually takes place about two weeks before the actual auction. Find out the sale price of other properties in the neighborhood to get a sense of how much you ultimately should bid. You also may want to bring a home inspector to assess the property.
On the day of the auction, bring one or two forms of photo ID, which will be required at registration. You also may need a deposit in the form of a certified check. Deposits generally range from $5,000 to $10,000.
If you're lucky and your bid is accepted, you will have 30 days to close on the property. The government provides title insurance, but the buyer is responsible for nailing down a mortgage or other financing.
Lien properties
Local and state auctions can be another source of real estate.
Delinquent tax auctions -- which the IRS mostly has abandoned after reforms were enacted last year -- are still fairly common at the county level.
This type of auction can yield big bargains or offer solid investment opportunities if you're willing to be patient and deal with some complexities.
Rather than sell real estate directly, these auctions sell property liens. Generally, the liens are sold for the value of the taxes owed on the property.
The buyer holds on to the lien for a set period of time, usually one year. If the property owner defaults on the lien, the property goes to the lien holder. A property owner who chooses to pay back the taxes will have to pay a fee, which can be as high as 25 percent, to the lien holder.
It can be a win-win situation in many ways. Winning bidders either walk away with a property at a bargain price or receive a substantial return on their investment.
Because these auctions can be so lucrative, they attract many professional bidders.
"There are a lot of entrepreneurs and investment groups out there who do this just to get the interest," said Buddy Doyle, auction aficionado and executive director of the Government Auction Page. "Sometimes an individual doesn't have much of a chance."
But smaller, rural auctions offer a completely different experience.
"These can be a free-for-all," said Doyle. "Individuals hoping to pick up property on neighboring lands or people who want to move back to the country can get places for a really reasonable amount of money." Of course, they may have to wait a year to move in.
Before bidding on any real estate liens, go to the local courthouse and find out as much as you can about the property for sale. Also find out what types of deposits or ID requirements you may have to meet before taking part in the auction.
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