Minneapolis, Hennepin County look for responsible buyers for tax-forfeited homes

It took years for owners to lose their homes to unpaid taxes, but just an hour for a crop of eager buyers to snatch them up at a fast-paced ­Hennepin County auction.

The semiannual auction one recent morning in downtown Minneapolis drew a packed room of prospective landlords, rehabbers and homeowners, offering a rare glimpse at the market for distressed houses. While low price tags lured bidders of all stripes, new restrictions on buyers with unpaid taxes and rental license problems aimed to shut out bad actors.

Those hurdles are part of a larger county and Minneapolis effort to rethink how they attract responsible homeowners to tax-forfeited homes in areas like north Minneapolis. County officials are considering a special auction this summer just for buyers who intend to live in the homes, with further hopes to accelerate the forfeiture period for some abandoned properties. The city, which siphons many homes away from the auction, cast a wider net for its buyers this year and promised to simplify its lengthy purchasing process.

By comparison, the regular auction is still fueled by speed and cash — making it somewhat controversial.

"Sometimes some of the worst players have picked up properties at the auction process," said Jean Bain, consultant for the Northside Home Fund, which tracks north ­Minneapolis housing.

County records show polarizing landlord Mahmood Khan, for example, has picked up four properties in recent years by paying the minimum bid after no one picked them up at the auction. But he is barred under the county's new rules, since the city has revoked more than one of his rental licenses.

At the Hennepin County Government Center, auctioneer Jesse Hughes doled out 19 homes and seven plots of land for prices ranging from $2,800 to $502,400 — the latter for a commercial plot in Champlin. Most homes were clustered in some of the most economically depressed neighborhoods of north Minneapolis, selling for an average of about $36,000. Ten vacant parcels garnered no bids.

The stars of the show were auction first-timers: Patrick Doolittle and his business partner Ron Conner. Doolittle, general manager of several suburban Excel Pawn and Jewelry locations, purchased seven houses and two pieces of land for more than $405,000 — much of it owed on the spot.

Doolittle, who hadn't seen the homes, said they intend to rehab them and sell to people who want to live in them. "We usually get the houses nobody else wants because there's too much work for them to tackle," said Doolittle, who plays the role of investor and project manager.

The pair said they have been rehabbing distressed homes across the metro area, often by acquiring foreclosures through the MLS and Twin Cities Community Land Bank. But they were drawn to the auction because "the inventory in the traditional market is dry," Conner said.

The number of homes entering tax forfeiture also is tapering off since the Great Recession. Hennepin County data show the 134 homes that entered forfeiture in 2014 was the lowest number since 2008 — down from a 2011 peak of 255. The number of penalty notices mailed for unpaid taxes, an indicator of future forfeiture trends, was at its lowest point since the late 1990s.

Ramsey County, which holds its auction on May 22, saw 70 forfeitures last year — the lowest since 2010.

"People couldn't afford to [rent] there," said Hall, who works in corrections. Some at the auction had big dreams. Hashim Yonis paid $25,000 for a house on West Broadway near 24th Avenue that he hopes to convert into an employment, business or housing resource center for East Africans.

"I want to change the perception of East Africans living in public housing to East Africans who really own properties in the city of Minneapolis," said Yonis, a former parks employee who was recently convicted of felony theft for taking soccer field rental funds. A judge later sentenced him for a gross misdemeanor instead.

Rising values make the economics difficult for more thorough rehabbers who specialize in restoring old homes. Because of that, Mark Chapin, the county's director of resident and real estate services, says he is eyeing a pilot initiative to hire small-business contractors to fix up homes before they are sold at auction.

Andre Duke, a Veterans Affairs employee who has been attending auctions for decades, paid $4,000 for a parcel of vacant land at 3600 Emerson Av., with plans to build a house on it.

"You can sell a single-family house in north Minneapolis, where a couple of years ago you couldn't sell nothing in north Minneapolis," Duke said.

Chapin said they were considering a program to sell some homes for $1 to people who intend to live there, but they are now thinking instead of holding a special auction for those types of buyers.

"I don't think we have to give away the homes for people to be attracted to them," Chapin said. "I think even north Minneapolis is starting to turn. It's not there yet, but it's starting to tip."