The property market in Metro Vancouver is in a very tight situation with more potential homebuyers than its listings. Because of this, it has already been a normal thing every November that homes are auctioned off to the highest bidder.
According to CTV News, that auction is more popularly called a tax sale, where the city claims a property with three years of unpaid property taxes and auctions it off. For this year there are 18 properties up for bidding. These properties owe the city total of $600,000 in unpaid taxes and soon these properties will belong to the highest bidder.
The amount that the highest bidder will be paying will include the so called "upset price" from which the bidding starts. By definition, the upset price is the lowest acceptable minimum price of a property in an auction. The upset price is equivalent to the total of the longest overdue taxes plus interest. In these cases, the market value therefore is often many times higher than the opening bid.
According to CTV News, one of these properties, a business that has been seized by the government will be auctioned with a starting bid of about $24,000. But it has been valued at $2.1 million. Moreover it has been found out that properties like this, already seem empty and CTV has been told that, though not popularly heard of, tax sales initiated by the city are commonly observed across Canada among other places.
And these properties don't seem to be good investments. What actually happens in cases like this is that after the tax sale the "current owners" are granted one year to buy back the property by paying whatever they owe to the city.
In cases where the owner is actually able to redeem the property the bidder loses it and the city gives the bidder their money back and an interest of 6%. Therefore bidders who participate in sales taxes are actually looking forward to that 6% return on the investment instead of owning that property.
