Auctioneer to city: buyers avoid sales with too many restrictions

Frank T. Pietrzak of Absolute Auctions & Realty, Inc. told city officials on Tuesday that property buyers favor cities who offer the least restrictive conditions. His advice ran contrary to desires expressed by officials to qualify buyers before they purchased city owned property at auction.

Pietrzak spoke before the Common Council, Mayor and Controller to pitch his company’s real estate auction services. He explained his company added all commission and marketing fees to the buyer’s price so that there was no expense to the city. He also detailed how all auction winners would be required to put down a verified deposit before leaving the auction. He said that this requirement helped filter out buyers who weren’t ready to follow through.

Pietrzak said in regards to his prior experience with marketing, “One of the things that municipalities were doing was they were either not spending enough money on marketing, and their sales that they conducted themselves were not well known. Or, they didn’t really know where to market those properties.”

He went on to say that his company had learned to do sales and marketing very well and would work with the city to come up with a plan that was appropriate for the types of properties being sold.

Alderman Ron Barone said,“I think we are looking for a little more accountability from the buyer. If there is some way we could set up a system…to check their credentials, their credit.”

Pietrzak said that his company does not run credit checks or ask for financing information because, “you don’t want to ask for financing when you are saying the sale is not contingent on financing. And that’s a matter of law…we have to be careful how close we get to that issue.”

Controller Matthew Agresta asked, “For instance…somebody comes in to buy a house at $5000…if it’s going to cost $30,000 to bring it up to code, we don’t have the right to look and see if they have the ability to make those improvements financially?”

Pietrzak said that the city could put in certain requirements, but in his experience, looking at buyer’s bank statements or letters of credit from a bank were not good indicators of whether the buyer would follow through with bringing a property up to code.

“We want to do basic credit checks before they purchase the home,” said Alderwoman Diane Hatzenbuhler, “because the bottom line is, if they have a bad credit history, buying a property for $500 from the city is not going to do us any good. So are you saying we can’t do that, it’s not good to do that, or it’s not legal to do that?”

Pietrzak said he didn’t want to say it wasn’t legal, but that their lawyers have cautioned them from doing credit checks because of the possible implication of providing financing.

He went on to explain that from his experience in the real estate field, credit checks wouldn’t solve the problem. “You can run my credit check…but if there is a business point where I decide I’m going to lose money on that property, because there’s just too much repair – I’m done…I’ll default… and I was the cleanest whistle guy you looked at. But it’s just business and I’m done.”

Pietrzak warned that too many hoops would dissuade buyers. He compared his experience working with two cities close to each other in NY that he had dealt with, Beacon and Newburgh. According to Pietrzak, Newburgh tried putting restrictions such as the ones being talked about.

“They say, Frank, I’m not coming to the city of Newburgh. The city of Beacon will let me buy and renovate without all of this hoop jumping. So I’m buying over there.”

He said that Newburgh still had 350 properties up for sale that buyers wanted but didn’t want to deal with all the restrictions.

“For us as a city wanting to put these properties back on the tax rolls … we don’t want to choke the life out of them, but we do want to make sure [the buyers] are accountable,” said Alderwoman Valerie Beekman.

“Can you put a limit on the number of properties purchased?” asked Mayor Ann Thane, citing a number of houses that were recently bought by one entity who failed to follow through with the purchase.

Pietrzak said that was possible, but reiterated that their requirement for an immediate, non-refundable down payment would help in reducing the risk of buyers backing out on a property.

Barone asked about verifying the identify and location of the buyer. Pietrzak said that a driver’s license or passport is required for any buyer to register for their auctions and that they would insist on getting a street address rather than a PO box.

Barone also asked about including “reverter” clauses, so that a house would have to be brought up to code within a certain time period or would revert back to the city. Pietrzak said he has seen that type of clause used before and that it might work well.

“The reality of the day is this is a difficult process. It’s difficult from your side as a municipality. It’s difficult from the buyer’s side coming in, to buy and renovate and comply and be a good taxpayer…It has to be very user-friendly to attract those people.”

Tim Becker

Tim Becker is the owner of Anthem Websites Inc. which publishes The Compass. He serves as both editor and a writer.

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