DC Gov Liquidation of Vacant Properties by Hipchickindc


hipchickindc is a licensed real estate broker with extensive experience handling the sales of distressed properties.  Her clients include reputable developers, architects, and homeowners prepared to finance and manage major renovations.  The opinions expressed below are her own and do not necessarily reflect those of the company or professional associations that she is affiliated with.

Initially, I was pleased to see the bright yellow signs on several of the abandoned, neglected, yet architecturally and historically significant homes in my neighborhood.  I’ve been interested in some of the properties for years.  To me, they represent possibilities for change and revitalization.

I’m sure the DC Government feels the same way because in 2008, the Property Acquisition and Disposition Division was established.  The tag line of their web page even says, “Revitalizing Communities One Home at a Time”.

The yellow signs announce in bold lettering that over thirty properties owned by DC Government will be auctioned off on the 30th of January 2009.  Potential buyers are directed to the Alex Cooper Auctioneers website.  I dutifully followed the crumbs and came upon the DC Gov Auction pages here: http://realestate.alexcooper.com/featured/gallery/7/#

In addition to the signs and the web page, listings of the properties have begun to appear in the local multiple listing system.  The ones that I have seen indicate a list price of $20,000.  The remarks clearly indicate that the price is subject to auction.  You can see the listings here: http://matrix.mris.com/Matrix/Public/Email.aspx?ID=28497228299

Buyers that are interested should attend the Buyer Seminar scheduled for the January 22nd, 2009.  More information is available on the Alex Cooper link.

Here is some information you should be aware of before even bothering to attend the seminar: Continues after the jump.

  1. The properties are not available for inspection prior to the sale.  I often tell my clients that the properties built 100 years ago are typically very solid, however, shells vary widely in terms of structural condition.  If the interior has been subject to severe termite or water damage, there could be much more expensive costs than expected for restoration.  You also never know what could convey with the property, such as, oh, I don’t know, human remains?: http://www.washingtonpost.com/wp-dyn/content/article/2005/10/15/AR2005101501278_pf.html
  2. There properties are being sold subject to covenants.  It appears that DC Gov is selling these properties subject to time frames and guidelines related to renovation and possibly re-sale.  Hopefully, these buyers will be able to get their permits from DC Gov sooner than my clients have been recently.
  3. Bring lots of cash.  Owner occupants are able to finance renovations fairly smoothly through FHA(203)k products.  Investor financing, however, is very, very challenging to come by.  (I would bet that the majority of foreclosures in the downtown DC market were failed investor projects.)  Because these properties are small and still require extensive work and high management, my guess is that buyers with cash or private equity financing will think twice unless they can buy numerous properties in bulk.  At minimum, buyers will need $10,000. per property to bid.  If a bid is accepted, the buyer must provide a 10% deposit (the $10k registration fee will be applied to the 10%). 

If anyone is planning to attend the Buyer Seminar, I’d love to hear back about how it goes.

40 Comment

  • there are some really sexy looking houses there. Makes me wish I had more cash on hand. Id love to bid on one for a pet project. My question is this. 20,000 being the starting bid. are these expected to be bid up fairly close to market value for a shell in these locations? or does the fact that there are so many unknowns keep them a bargain? We all know the land these houses sits on is worth 10 times those starting bids… I remember that article about the dead body in the auctioned house and I thought. hell he bought that house for that much??? id gladly have shoveled out the human remains for a deal like that

  • The auction info mentions that there may be a hidden minimum reserve AND that DC Gov may bid on them as well (sort of like the banks at foreclosure auctions).

    I’m disappointed because, as we had seen in a recent PoP post, DC goes ahead and pays triple the market value for a building designated for affordable housing. If developers used this formula, they’d be out of business (and many are). My guess is that they’re likely to let these go way lower than they could have if they were managed individually.

  • My only fear would be that they become places like that yellow monstrosity on New Hampshire

  • This is terrific news. 1001 Quebec has been an eyesore in the neighborhood for some time, and I look forward to having new neighbors there. I suspect it will take a substantial investment, but it is only two bocks from a metro, all the revitalization along Georgia Ave., a quick walk to Columbia Heights, and surrounded by great neighbors.

    Hipchick, didn’t you once post resources to support owners who are rehabbing property?

  • There was some discussion of the FHA(203)k loan product. As far as resources to support owners, I’d say they’d be a) working with an agent that truly understands this type of property, financing, and what is involved in the transaction, and b) get referrals from trusted sources and interview several contractors and architects, and c) talk to other people who have had the experience of doing this kind of renovation, and d) be prepared to wait a heck of a long time before you can spend any of your rehab money unless you know somebody in the permitting department downtown.

  • “DC goes ahead and pays triple the market value for a building designated for affordable housing.”

    Umm no. DC tax assessments, for commercial buildings especially, are not always based in reality. A tax assessment is definitely not equal to an appraisal. Or even based in the reality as we understand it in this universe.

  • hipchickindc: you say that initially you were pleased to see these houses going to auction. that use of initially made me think you’d have something to say along the lines of “but, i’ve changed my mind”.

    have you? just curious.

  • Jamie, you’re right. I misspoke.

    IMGoph, let’s just say that I toned down my original post.

    I’d love to see these properties purchased and rehabbed. I am very curious to see how the sale goes.

  • I can’t understand why DC would prevent the buildings from being inspected prior to sale. I would probably have considered being involved in this auction, had an inspection been possible. But I don’t have enough money to take a risk like that. Why not just lockbox them? What do they have to gain?

    The condition inside could be the difference between a $50K rehab and a $300K gut job. As a result of not being able to inspect them, I would assume that the ultimate sale price of the average house would be much lower than the market value, since you basically have to assume that anything you buy is going to be a shell, possibly with major structural issues. But this is probably not the case… unless, of course, DC has already sold off anything that is NOT a piece of crap through other channels.

    Doesn’t make sense unless they are all utter pieces of crap that should be razed.

  • They used to “sell” vacant houses in DC for $100, anyone could apply for the annual auction. But there was a problem with inexperienced first time homeowners with lower incomes suddenly finding themselves with a home needed $100,000 in repairs. I sure wish though I had been able to buy one of those properties – at the time, one was in the 1700 block of Irving St in Mt. Pleasant. I’m actually curious if any PoP readers bought one of those vacant properties?

    Anyway, the new system supposedly will do a better job of making sure home buyers are prepared for what they’re getting into. These days it seems like shells are selling for half the price they did a couple years ago (while homes in good condition haven’t declined by much). I think there are some deals to be had….

  • I don’t understand how someone can bid on a property without some sort of inspection prior? What if there are serious structural problems? Is there some sort of ‘out clause’ that allows the buyer to walk away under certain conditions without losing their deposit? They way the auction is structured, I don’t see how an individual can take on that much risk. I see them all getting bought up by a large developer with deeper pockets who will cut them up into condos. I would love to buy the row house on 13th St but can’t take on the risk that it could have more problems than I or my contractor could handle.

  • @ Jamie: You and I are definitely on the same wavelength!

  • I’d never officially condone this, but knowing the general state of most of these houses, if a homeless guy can get in to sleep you can most likely get in to inspect it. Most structural issues can be seen by walking around the house (some foundation issues you must see inside the basement).
    I can’t imagine someone with the guts to bid on one of these not have the guts to break in and inspect it. As we all know, it’s not like they’d ever get prosecuted for comitting such a crime in DC.

  • Ah, the eternal dilemma of risk vs. reward! If there was no or little risk, then these couldn’t be had for bargain prices. Its the way the world works. Still, I understand the logic behind the argument that if the DC gov’t did lockbox them and allow people to inspect them, then the DC gov’t would be able to secure a higher price for the ones in good condition. If anyone at the DC gov’t has thought about this (admittedly not a good chance) and decided against it, it may be because the majority of these have problems that would discourage non-developers, and/or allowing inspections would just make sure the “good” condition ones sold and the “bad” conditions ones stayed on the DC tax books (as it is now, a developer may not be willing to risk an investment on any one property–because it might turn out to be a money pit–but if you buy 3 properties and 1 turns out to be “bad” then that’s a manageable risk…you can reallocate profits from the “good” ones to shore up the “bad” one).

    Plus developers may be preferable to the District because they will ensure that a house is sold at a higher price, thereby locking in a higher tax assessment for years to come; right now real estate taxes–taxes, not assessed value–can only rise by a certain percentage per year, but once a property sells it “jumps” to the market value for tax purposes.

    That and maybe, in reality, there are few people willing to spend 500 or 600 hundred dollars on a speculative inspection of an auction property, so why bother?

  • I wouldn’t pay anyone for a “real” inspection, I just want to go in and look at the damn house I’m about to make an offer on!

    They would still sell the bad ones, they just wouldn’t get as much for them. But as it is, anyone who’s about to buy a house sight-unseen would be stupid to pay any more for it than they would if they had seen it and it was a disaster. That must be the assumption. So they’ll probably end up selling these for 50K-75K each instead of possibly twice that if any of them aren’t total disasters.

  • Y’know… the more I think about this, maybe I should go to this thing. Since it seems like you’d have to be insane to bid any substantial amount of money on these properties, maybe not very many people will show up and I can buy a house for 10 grand…

  • Jamie, I’d love it if you do go and report back.

    Note, however, that there may be a hidden reserve, just like in a foreclosure auction.

  • If I could get one in a decent neighborhood for super cheap, I’d quit my job and hire half of the Home Depot parking lot to meet the renovation timeline.

  • Do you find out the reserve during the auction? Or would you bid on a property, think you’ve won, then when you go to write your deposit check they say “oh sorry, you didn’t meet the reserve”

  • Davey, they really want you to show up at the Buyer Seminar to answer those kinds of questions. (If you look at their FAQs, they will, however, twice tell you to take Metro, which cracks me up.)

  • The only thing that would make this even more quintessentially DC, is if they had scheduled it for January 20th. With any luck, though, there will still be a few functioning metro cars on the 22nd.

  • You can definitely get some surprises when you buy a property you can’t inspect first – anyone remember this?

    UPDATE: Months After Skeleton Is Found, Identity Still a Puzzle

    After a pile of property tax bills went unpaid, the city foreclosed on Wilson’s rowhouse at 513 Florida Ave. NW and auctioned it to an investor for $2,264. When the new owner’s representative inspected the building, he found cobwebs, mildew, and unruly heaps of dusty books and newspapers. Reaching the second floor, the man came upon a bathtub containing a skeleton.


  • That’s the article I linked in the post above.

  • How about Habitat for Humanity with Jimmy Carter, or “This Old House” TV program for some of these buildings that need urgent attention as all classes of people are represented regardless of income or status, that would be the sensible thing to do.

  • They should promote that: One Free Skeleton with each Vacant Home.

    I think there are a lot of Goth’s with good credit who might be enticed to drive up the bidding.

  • Wow a lot of handwringing here. Im not sure how it works in dc but these types of auctions are very common in the Midwest. Usually the municipality is only concerned about making up whatever back taxes or liens on the property and sets up the auction accordingly for that purpose along with a description of the condition of the house based on a cursory inspection. The minimum bids are typically significantly low enough relative to market value to account for the potential/cost risk to the buyer to repair damage and fix it up for sale. yes it’s still a gamble, but a common one

  • risk v reward. ah yes. american capitalism. Subsidised and Bailed out Risk. Privatized rewards. gotta love it.

  • Interested potential bidders ought to read the 88 page disposition agreement. Lots of paperwork required. It’s not quite like an episode of Extreme Makeover Home Edition…

  • Just give it to DC to sell vacant properties during the bottom of the market. everyone is right, dc gov is incompetent! does anyone agree that is retarded to sell vacant properties now?

  • Please refrain from using the word “retarded” for many with disabilities it’s like the N word,lets find a better term that does not insult mentally handicapped persons.

  • I’m an investor and agent, and I’ll be going to the auction, but mostly with the hopes that not many people attend/bid, which is probably unlikely because it’s been heavily advertised. Although this comment is probably not going to be popular, not too many of the properties are really in prime areas right now for a solid investment. I drove past and inspected (from the outside) most of the properties last week. Yes, the ones in Ledroit Park are beautiful, huge and historic, but Ledroit Park has TONS of properties on the market right now and is getting killed with short sales and foreclosures. The one on 13th St is in the best location, but it doesn’t have parking and backs to a public housing project. I really liked the one on 6th st NW until I went around back and realized that it doesn’t have parking or a back yard.

    I do think it’s a great opportunity for someone looking for a deal to fix up and move into themselves. Just plan on it being a full gut and spending around $150K to fix up. That way, you’re prepared for the worst but hope for the best.

  • “It’s not quite like an episode of Extreme Makeover Home Edition…”

    Well said.

    Dave, LeDroit and Bloomingdale are my primary markets, so I’m not sure where you’re seeing the “tons of properties” or short sales or foreclosures. I do reports weekly for the listserv and even including the NE side of Eckington, we are below the inventory we had during the hot market years.

    I’d LOVE to see 100 Bryant (the one at the top of this post) get a new lease on life.

  • I went to several Alex Cooper auctions in 2007/early 2008. I did not see any steals. In fact, the properties I was interested in were sold for a lot more than I was willing to pay – and that’s not even counting the buyer’s premium.

    I think Alex Cooper auctions might be sort of like Ebay – people get so wrapped up in the process that they end up paying more for something than at Amazon.

    With this auction you have to deal with covenants? Forget it.

    I live in Ledroit Park, and it’s an OK area. But it is surrounded by bad areas on all sides, and crime travels. Someone got killed in the last month just ~3 blocks away from 2 of the properties listed. It looks like drug dealing has resumed at 1st and RI as well in the last 3-4 months as well.

  • … And yes, I am not surprised that I can’t find much info on Alex Cooper or DHCD website about any of the issues (covenants, liens, reserves, etc)

  • I attended one of the earlier Alex Cooper seminars. These are offered periodically in Towson. I’ve also been to the auctions at upper Wisconsin Ave to observe. You won’t find homes selling for $10,000. You are responsible for inspecting the house or finding out whatever you can about it in advance of the sale. You may be responsible for evicting people and securing the property. You are responsible for obtaining the funding or financing, for instance if you bid $100 K on a row house you’ve got to have access to that amount in cash, or have already set up a line of credit with a bank.

    Likely these properties are all taxed at the vacant rate. I don’t think you’d be responsible for prior liens or taxes, however you’d want to be sure to clear the title. And future taxes would likely be at 5 cents on the dollar appraised value (no matter the selling price, there is a high assessed value on the land). These taxes will be due June 15 and then again in Sept — could be $20K or more annually in taxes — be prepared.

  • Bogfrog- Your analysis of the taxes is not entirely accurate. Yes many of them are taxed at the vacant rate, although you can get your tax rate changed pretty easily by showing either a building permit (which you’d need) or the listing agreement (the HUD-1 will suffice if you just bought the property). This was a total nightmare to get done when taxes were due in September (long lines, delays) but I just did it today on a property and it took 5 minutes. Also, unlikely to have to evict anyone on any of these houses- they’ve all been boarded and vacant for years, some for decades.

    hipchickindc- You’re right, I should have done more research. I have seen some properties sit on the market for quite a while in those areas, although you’d know the market much better than I would. I’ll eat my words this time!

  • No worries. I’m a little sensitive about the intel in that little real estate corner of the world, since we’ve been overcoming negative perceptions for years.

    Pleeeease report back if you go to the Buyer Seminar or the Auction. You can always e-mail me at my screen name at yahoo.

  • As a potential new home buyer, I’m really glad I found this post. I’m a DC government employee looking for an inexpensive property to rehab as I can afford. This is not an investment as I plan to be here for five years or more. Without having done a ton of research (as I never really expected I could afford a property in this town), I hear there are programs for folks like me. Of course I know firsthand others’ horror stories with various agencies, but since I work inside this monster of bureaucracy, maybe it’ll be a little easier. Maybe.

    I live on a meager salary in the hood, so I’m already used to potential crime. What matters most to me is a south-facing roof, 1,000 sq ft or more of backyard, and potentially a garage for my projects. If anyone out there has some tips, I would love hearing them – suleboatworks at gmail.com. I do plan on attending the Buying Seminar.

  • Wow. Good article, thanks for posting. I didn’t go to the auction, and I don’t know much about any of the properties, but I am surprised that many sold in the 300s and the 400s considering I think we can assume that they need lots of work and there are other properties on the market right now in the 100s and 200s in neighborhoods like Petworth, Park View, and Shaw, and I would imagine that these homes are in similar in condition to the ones that were auctioned.

    I think it’s good in that it raised revenue for the District and that these homes will no longer be vacant, but I think many of these buyers likely overpaid, which is bad for our neighborhoods since they may end up in over their heads in renovation costs, underwater, and ending up in foreclosure, starting the process all over again.

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