ST. LOUIS (AP) - Four times a year, the city of St. Louis auctions hundreds of properties with delinquent taxes at the civil courts building downtown. In the lobby, a sheriff's deputy reads from a list of parcels, many of which are vacant lots and deteriorating homes that draw little interest from the crowd of prospective buyers.
Every few minutes, a bidding war breaks out over a more desirable property. Robert Vroman stays away from those, the St. Louis Post-Dispatch (http://bit.ly/1CLzCk8) reported.
To the city's most prolific tax sale investor, opportunity lies in what no one else wants.
Since 2011, Vroman, 34, has bought more than 140 properties from tax auctions for himself and other investors. The properties, which he said "usually need a lot of cosmetic work," are mostly in struggling, sometimes blighted neighborhoods.
There's an "A'' class of properties that almost everyone at the tax sale cares about, Vroman said. There's a drop-off in quality for the "B'' properties, which is his specialty, he said, and there's not much competition.
"I am the barometer of decay," he said. "I guess my slogan is 'I find the best of the worst.'"
Most of the properties bought by his company, Vroman Industries, are scattered across the city's north side, and the rest are mostly located southeast of Gravois Avenue in south city.
He buys homes for the back tax amount (usually around $2,400), then sells them for around $10,000. He has legal costs and additional expenses for cleaning or minor fixes, but other repairs needed are the buyer's responsibility. "We are aiming to buy stuff that is currently livable," he said.
His success depends on high volume and low costs. He declined to say how much money he was making.
About 15 percent of the deals are done in cash, he said, and the rest are contracts for deeds, a rent-to-own situation where buyers put money down and make monthly payments of $500 or so until the house is theirs.
Of course, this model comes with risks, both for the buyer and for Vroman.
The contracts stipulate that buyers are responsible for repairs needed before the city will issue an occupancy permit. If they eventually fall behind on payment plans, they forfeit previous payments.
Vroman said 15 percent of his buyers failed on the payments and were evicted. He said he usually pays for their first month of rent elsewhere, to help them land on their feet, and also so he won't have to change locks or worry about property damage.
He said that those who fail do so quickly, and that no one had ever made more than $3,000 in payments before defaulting. He said they're usually at least six months behind before he tells them to leave.
"We only evict when we absolutely have to and we know we can sell it again," he said.
Once, he said he gave away a home to someone who fell behind, which he admitted wasn't just out of goodwill. "The hassle of getting them out and someone else in on a $5,000 house, we'll just give it away," he said. "It's not worth it."
Vroman's screening process is thin. The type of buyer interested in these properties often doesn't have a bank account. He doesn't request eviction histories. Typically, he requires proof of income, though sometimes not.
To community development groups who work with lower-income tenants and homebuyers, contract for deeds and limited screening raise concerns. So does the prospect of the eventual owner having to cover expensive repairs needed down the line.
"When we're rehabbing homes, we don't just say, 'Here you go,' and put them in the home," said Antoinette Cousins, director of the Riverview West Florissant Community Development Corporation. "We make sure they have the necessary resources around them."
Vroman makes no attempt to hide his profit motive, but insists he's flexible with buyers, who he said are getting the deal of a lifetime.
"Because we get them for nothing we can turn them over (cheaply)," he said. ".We're probably the only people these people would ever be able to buy a house with."
Many of his buyers have experience working in construction, and are well aware of the property's condition and any repairs needed before signing the contract, he said.
That's the case for Angelia Everett, 40, and her husband, who with three of her children moved into a three-bedroom home on Arlington Avenue more than a year ago. She bought it for $18,000, and still owes $8,000. She pays $500 a month. She said that she felt the sale price was fair and the payments are manageable.
Her husband does a lot of construction and electric work, so their plan was for him to make a lot of the needed repairs, which she said they were well aware of when they signed the contract. She works as a medical administrative assistant.
She said repair costs sometimes make it harder to keep up with the monthly payments, but that Vroman is willing to work with her. "I've had a great experience working with Robert."
City tax sale attorneys said they weren't aware of any other investor taking Vroman's approach, at least not on a large scale.
Because many auctioned properties aren't going to have much future appreciation, investors typically buy them to rent them out, said attorney Jeff Weisman. "They're in it for the cash flow . If you're not doing high volume, (Vroman's) approach would be meaningless."
Vroman frequently points out that the alternative for these properties is vacancy. Anything that receives no bids at an auction (and he only places the minimum bid) joins the boarded-up ranks of the city's Land Reutilization Authority. "They'd be worthless," he said.
To Preservation Research Office director Michael Allen what Vroman is doing is "quietly revolutionary" because it helps dispel the belief that so much of what ends up in tax sales has zero value."What he's done is show that people do want to buy them," Allen said, "and they do have value."
As to whether buyers will be able to maintain them over time, Allen said he views Vroman's clients as "kind of representing a microcosm of city property owners as a whole. On any given block you're going to find people who can't afford to patch roofs."
Vroman, he said, gets buildings back on the tax rolls and gives them a chance to survive.
Tax sale properties can be difficult to assess: An intact facade and curtained windows can mask a ransacked, rotting interior. To limit risk, Vroman digs through city records to find any scrap of information he can for each property. He also visits about 800 properties each year.
He's posted YouTube videos of some of his trips through depopulated neighborhoods and abandoned properties, and a reporter and photographer recently joined him for a morning of surveying.
The better properties on his list - and many of the ones he ends up buying - are occupied. When he visits a home, he knocks to see if anyone's there.
His first move after buying an occupied property is to see if he can sell it back to the previous owner at a discount, though it rarely works out.
If the property seems vacant, he'll wander around the side and back of the house, peek in windows, and talk to neighbors. How long has the property been empty? Has it been broken into? Are there squatters? If a property is unsecured and clearly abandoned, he might wander inside.
But research yields only so much information. To some degree, he said, this is gambling. "We have to place our bets as judiciously as possible and see what comes back."
Some homes ended up being too damaged to sell, so he's given a few away to churches and nonprofits. A couple of properties couldn't even be given away, so he didn't pay taxes on them and lost them at auctions.
Three of his properties were destroyed by fires. Others have been broken into and stripped of copper, plumbing and wiring. He described owning vacant properties as holding onto a "hot potato."
The condition of some of Vroman's properties has drawn the attention of city building inspectors.
His contracts say it's the buyer's responsibility to comply with code, though he said if a violation goes to court, he'll make the repairs.
Matt Moak, the city's chief problem properties attorney, said that the owner, not the tenant, is legally accountable for violations. Vroman's properties have accrued citations, though Moak said he'd "cleaned up his pending court case violations fairly quickly."
Before specializing in tax auctions, Vroman spent several years working for his grandparents' real estate firm. He began looking for ways to buy cheap property on his own, initially looking at foreclosures before deciding tax sales provided the most opportunity.
After spending time at the auctions, Vroman became so critical of how the sheriff's department runs them that he decided to run for the position in 2012, which he admitted was "kind of a lark." He believes the auctions are poorly advertised and too difficult to navigate for most people to bother. A libertarian who heads the St. Louis City Republican Committee, Vroman ran against longtime incumbent James Murphy, who won easily. In 2014, Vroman ran for a state House of Representative seat for the 79th District, which he also lost.
He encourages others to get involved in tax auctions, and occasionally lectures on the topic at coffee shops. A woman he met while surveying properties even came to the sale with him on Tuesday and bought a vacant home on her block.
Ultimately, his biggest limiting factor isn't a lack of properties that have value, but a lack of capital. Vroman brings $15,000 to $20,000 to each auction, and can't buy everything he wants.
"I wish I could buy three times what I do now," he said. To get there, he's in the process of recruiting more investors.
At some auctions this month, he bought six homes, a mixed-use building, a four-family unit and an empty lot. He also bought three billboards, bringing the total he owns to 13. He wants to grow, and it's time to start advertising.
Information from: St. Louis Post-Dispatch, http://www.stltoday.com