Eric Sabree just exposed the fatal flaw at the heart of the Wayne County foreclosure auction

The tax foreclosure system in Wayne County is a huge mess, with shattering consequences for thousands of Detroiters — and we can thank the guy in charge for making that painfully clear.

A company owned by Wayne County Treasurer Eric Sabree’s wife bought up houses in previous auctions and failed to pay taxes on many of them. Sabree and his family members’ actions, brought to light by Detroit News and Free Press investigations published Tuesday, violate department policy about employee participation in the tax auction, as well as auction rules themselves.

Sabree was a deputy treasurer in 2011 when U.S. Development Services, a real estate company run by his wife, bought three Harper Woods houses in the auction. (Sabree was also listed as a member of the company at that time.) Employees in the Treasurer’s Office and their family members are not supposed to participate in the auction, though Sabree questioned whether the policy would have applied in 2011, since the auction was then run by a third party. He told the Free Press he regretted not telling family members to not bid.

U.S. Development Services owns multiple properties, and ten of them had racked up $29,000 in delinquent taxes as of November 2018. The tax bills were paid shortly after the Detroit News asked about them. One of them should have already been auctioned off under state law, but was kept out of the auction.

The shadiness goes further. Sabree and U.S. Development Services had repeated delinquent tax bills on two properties purchased in the auction, violating the rule requiring buyers to stay current on taxes for two years. On Wednesday, Wayne County Executive Warren Evans requested an ethics review of purchases linked to Sabree.

Here’s the bigger problem: the auction process itself. It’s certainly achieved the goal of making foreclosure easier, and it’s also actuallyhelped Wayne County make millions. But If you’re looking at the impact on Detroit and Detroiters’ stability, it’s been an utter failure.

One in three Detroit properties â€• about 145,000 ― has gone through tax foreclosure in the last 15 years, many of them several times over. In the last five years, more than 30,000 occupied homes were put in the county auction. The auction contributes to population loss, and properties often end up vacant and blighted, eroding neighborhoods block by block.

The Detroit News and Free Press investigations have many more details about a complex web of participation in county property deals by Sabree and his family members going back a decade, when Sabree was an attorney for the county.

It could definitely be worse — it’s not like Sabree was secretly buying dozens of the best properties each year and willfully skipping out on their tax bills. His statement to the News acknowledges that his family is “like most Americans today, we have debt and we work through debt.” Trouble paying tax bills is something a lot of Detroiters can relate to.

But the rule-breaking and lack of transparency are egregious. And the way Sabree and his spokesman downplayed their seriousness seems downright hypocritical.  

Spokesman Mario Morrow said in a statement to the News that “Based on the volume of properties sold, if a property was sold to a relative or friend of the Treasurer’s Office employee, it was insignificant.”

Sabree laid blame on the rule barring family participation, calling it “intrusive and unrealistic.” He plans to eliminate it, he said.

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That attitude stands in stark contrast to the way the Treasurer’s Office has approached homeowners struggling to pay their taxes over the years.

That attitude stands in stark contrast to the way the Treasurer’s Office has approached homeowners struggling to pay their taxes over the years.

Dave Szymanski, former chief deputy treasurer, speaking to The Atlantic in 2014 while Sabree worked in the office: “If they can’t afford to pay their taxes, they really can’t afford to own a home.”

Ray Wojtowicz, former treasurer, to Bridge in 2017: “Just pay your taxes on time.”

Sabree, to the Detroit News in 2017, refuting residents’ concerns about inflated property value assessments leading to foreclosure: “State statute says that if you don’t pay your taxes for three years you get foreclosed. These foreclosures are legal. There’s nothing illegal about these foreclosures.”

Keeping owner-occupied properties out of the auction would be “disrespectful to people who pay their taxes,” he added.

Basically: We’re just following the law, and it’s not on us if you lose your house.

Rule breaking has, however, been a scourge of the tax auction, with excuses and exceptions made for seemingly anyone but struggling homeowners.

In 2014, a new state law was praised for closing the loophole that let tax scofflaws buy properties in the auction. Speculators who repeatedly buy up hundreds of properties in the auction and ignore their tax bills have been able to avoid the law. They hide behind LLCs, and strong enforcement hasn’t come from the Treasurer’s Office.   

Meanwhile, homeowners who went into foreclosure because they couldn’t afford their taxes were barred from bidding on their houses. The city of Detroit broke rules, too, failing to regularly assess property values as required by the state Constitution.

Detroit’s housing market bottomed out, but homeowners still got tax bills based on inflated property values. A study found that 10 percent of tax foreclosures between 2011 and 2015 were caused by “illegally inflated tax assessments.”

What’s more, state law requires cities to offer poverty exemption programs to reduce or totally eliminate property taxes for low-income homeowners. Detroit resoundingly failed to implement the program — an average of 40,000 households each year from 2012 to 2016 had incomes low enough to qualify for the tax exemption program, but only 5,000 applied in 2016, according to University of Michigan research.

The American Civil Liberties Union of Michigan actually took the city to court over residents who were foreclosed on despite qualifying for tax exemption. They were successful, reaching a settlement in 2018 that forced the city to notify eligible residents, make the application process easier and keep some homes out of the auction.

In the last few years, officials have started to acknowledge the disparity in the auction’s effect on poor residents and the radiating consequences for the whole city. A number of reforms have gone into effect, and foreclosure numbers have dropped significantly. Still, it’s too little, too late.

Jerry Paffendorf, who has tracked the auction and criticized its process through his property data company Loveland Technologies, takes a pessimistic view of the reforms.

“The foreclosure prevention innovations that have been made in recent years … have all been driven by third-parties and lawsuits, not internal political leadership,” Paffendorf wrote in a Wednesday Patreon post reflecting on the news about Sabree. “To get to a point of progress has been like pulling teeth.”

The Free Press editorial board is calling on Sabree to resign, but Paffendorf goes further.

“All leadership in that entire office needs to be cleared out. It needs to be forced to enact new policies and to be transparent in how it does things,” he wrote. (Paffendorf has several other concrete ideas to overhaul the foreclosure system at the state level.)

In 2015, researcher Alex Alsup, also working with Loveland at the time, dubbed the foreclosure crisis a “hurricane without water.” While that moniker reflects the magnitude of the problem, it’s not a natural disaster we just have to live with. It’s a system created by people, applied unevenly, and its flaws aren’t dictated by an unseen force. Sabree’s willingness to change a rule that affects his own family just made that totally apparent.

We’re working with our nonprofit partner Outlier Media and readers to track speculators who abuse the auction process. Our first workshop next week is full — sign up for the Detour email if you want to stay informed about future reporting and events. This initiative is supported by Detour members.