Ted Scheve is the kingpin of one of Washington's most unusual businesses. He is the undisputed champion buyer of properties seized by the District government for tax delinquency.
He was hard at work one day this week, dapper in a purple velour shirt that blended uneasily with the harsh light of the police department's lineup room, raising his hand to bid on one lot after another at the city's annual auction. He didn't get all those he sought; sometimes he was outbid by other connoisseurs of distressed real estate. But he picked up more than anyone else, scooping up many properties forthe minimum bid of $25 when no one bid against him.
The sale is the city's way of collecting hundreds of thousands of dollars in unpaid property taxes, assessments and liens. Property owners oftentimes pay their back taxes when they realize their property is about to be sold. Moreover, new property owners eventually have to pay all past-due amounts. For the buyers, it's a hit-or-miss way of picking up some valuable property.
It is an emotionless affair, a businesslike recitation of square and lot numbers and of dollars bid by a handful of investors. Whatever sad stories of personal failure and urban blight underly the delinquencies are checked at the door. For the District government, and for the bidders, only money talks.
Theodore J. Scheve of 2521 34th St. SE invests the most, tens of thousands of dollars annually. As the auctioneer, Minnetta Coles of the Department of Finance and Revenue, calls out the square and lot numbers ofthe properties to be sold, Scheve's hand shoots up on abouthalf of them and he calls out "Scheve." Often he is alone, but sometimes there are other voices -- names like Robinson, Monarch, Moon, Potvin -- and the bidding goes up, in $25 increments, to $1,000 or more. When Coles settled one disputed bid in favor of Scheve, the loser called out, "We know you've got that Scheve thing," chiding the auctioneer for awarding the property to Scheve. An anonymous voice from the back of the room told losing bidder Elbert Robinson, "Robinson, you know you're only No. 2."
Picking up property at the three-day tax sale, Scheve told a reporter, is "a sleazy business, like being a reporter." But the city benefits, to thetune of hundreds of thousands of dollars in cash pumped into its coffers by the bidders. But Scheve contends that the buyers aren't exactly making a killing.
"It's like gambling," he said. "You don't know what you're going to get." Since there were more than 5,000 properties listed when the announcement of the sale was published last month, he said, "there's no way you can inspect them all. Some of them are dogs that have been on the list for years because the city hopes some sucker will take them."
He said he once bid $13,000 for several adjoining properties, then learned they were on a Potomac Electric Power Co. right-of-way and virtually useless for development or resale. Standing at Scheve's side,Nathan Habib, another longtime property investor in the District, said he once bid on what he thought was a real sleeper, a property in Spring Valley, but it turned out to be "120feet long by one inch wide."
The bidders at the auction do not actually buy any property. They buy the rights to claim the property after two years if the owner of record does not redeem it in the meantime by paying the delinquent taxes. The cost to the buyer is the amount of delinquent taxes listed in the sale notice, plus whatever is bid at the auction for the rights, plus whatever other liens, assessments andback taxes are due.
"Sometimes what's owed is a lot morethan the thing is worth," one buyer said. "On the sale notice they only list the deliquent tax for the past year, but I bought one that had overdue taxes back to 1902."
Scheve,Habib and other buyers all claimed that the profitability of the business is being undermined by sloppy record-keeping and poor management at the Department of Finance and Revenue. When properties are redeemed, it takes months to get their money back, they said, and when they are not redeemed, it takes months to get the deeds that would allow them to resell or rehabilitate the properties they bought.
Then why do they bid?
Because, said Scheve, "you can't give away the winners" that sometimes are available. Scheve, who said he has been in the real estate and contracting business in Washington for nearly 40 years, said that the tax sale "is a hard-nosed business. Everybody resents it if you are getting some good properties." City workers, he said, dislike him because they see him as a man who profits from the misfortune of others. But "don't make me look like I'm wearing the black hat," he says. "I didn't take these propertiesand I didn't sell them. I just buy them. It's just numbers to me."
Potential bidders are required to put up cash deposits before the auction, and by the start of bidding earlier this week a battered metal box was filled with currency and certified checks.For his deposit, Scheve won the right to bid on properties such as these to which he won the rights: a 90-year-old garage at 1720 19th St. NW, for which he paid $1,000; a row house at 1702 New Jersey Ave. NW, which went for the $25 minimum; a tiny house at 1501 Vermont Ave. NW,also for $25; and a 675-square-foot lot at 403 Q St. NW, also for the minimum.