Homeowners Hammered by Foreclosure Also Losing Out on Auction Profits

from the Buffalo Times, Buffalo, NY

Imagine you or a loved one falling on hard financial times, which causes the loss of the family home to a tax foreclosure auction.

Then one day you discover that the home sold for much more than the back taxes, and you were entitled to claim that surplus. But you were never notified that money was there for you.

Such is the case for thousands out there who lost property in the City of Buffalo. There is about $11.6 million ready and waiting for those whose properties were sold for more than the tax debt at city auctions over the last five years. That number is certain to grow when the excess from 2015 is added next year. And there is nearly $3 million in surplus funds from Erie County in its own pot that could be claimed by former homeowners in the suburbs.

Over the decades and through many administrations, City Hall has failed to communicate the presence of any surplus to the rightful recipients. Although unaccountably not required by law, notifying stakeholders is the right thing to do. Starting next year, city officials have pledged to include information on surplus funds in the six to eight foreclosure notices sent to homeowners.

News business reporter Emma Sapong wrote about those unclaimed funds last week. Her meticulous research included numerous phone calls to former homeowners.

For those like Colleen Parker, who had lost her home in the tax lien sale last year, finding out about the money was like receiving pennies from heaven. Or, in her case, several thousand dollars from the city. Her former home netted a $92,742 surplus. That’s real money, especially to the 57-year-old who was making it on workers’ compensation and disability payments.

While the amounts vary, one former owner can claim $150,000. The average amount is $9,600. Auction sale prices have been going through the roof because of a confluence of speculation, investments and demand from immigrants.

As Sapong’s story outlined, after properties are auctioned the city withholds money for outstanding taxes, pays county tax and utility liens and deducts administrative and other fees. Leftovers are transferred to the county comptroller, who handles all unclaimed funds in the county. And then if the auction money is unclaimed for five years, it is turned over to the State Comptroller’s Office. The money becomes part of the general fund, but can still be claimed by going through the County Clerk’s Office, if the homeowner eventually finds out about the process.

Even that faint hope for unwitting stakeholders could be dashed under legislation sponsored by State Sen. Timothy M. Kennedy, D-Buffalo, and Assemblyman Sean M. Ryan, D-Buffalo.

The legislators want to use the unclaimed money to address urban blight by redirecting the money back to the city and its weatherization and home improvement program for low-income residents. While well-intentioned, that move would make the unclaimed funds unretrievable by former owners.

Political leaders should instead be making every effort to return the money to its proper owners.

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