> I'm skeptical of the "lien holder gets the equity" claim because it doesn't work that way outside of DC or in foreclosure generally, so I'd be very surprised it it wasn't a misunderstanding on the part of the author.

Here's what a recently formed lobbying organization, "At Home - The Alliance to Help Owners Maintain Equity", said in a spring 2012 letter:

""

A primary flaw in the current tax sale system results from the District government auctioning homes at tax sales even when property values are exponentially greater than the delinquent taxes (which may be as little as $500). If a homeowner is unable to redeem the home following the tax sale, the homeowner loses his/her home and all of the accumulated equity.

""

Now, the DC Bar Association's Antitrust and Consumer Law section said they agree with this letter and re-emphasized that they saw

""

Major Problems with the District’s Tax Sale System

Loss of Equity
Homeowners may lose all of their long built–up equity in a property with the tax sale purchaser enjoying an unjust windfall. There is no incentive in the current process to assure that homeowners receive adequate compensation for the loss of this equity, whether through amounts paid at a tax sale or upon disposition of the property following foreclosure. DC law is more punitive to homeowners in this regard than the law of many other jurisdictions.

""

See http://www.dcbar.org/for_lawyers/sections/antitrust_and_cons... .

The Post ended up covering this as news in May 2012, about a month after this statement came out, http://articles.washingtonpost.com/2012-05-28/local/35455912... .

From that 2012 article:

""

The city’s dual-step collection process, in which the OTR is responsible for auctioning off the lien but the investor who purchases the tax-sale certificate is responsible for the ensuing action, makes for a complicated system.

At the tax sale, a winning bidder assumes the delinquent taxes on the property, any penalties that have accrued and an auction fee. If and when the property owner pays off the taxes, the purchaser is refunded the original sale price plus 1.5 percent per month interest on the tab. If the owner fails to pay up within six months of the sale and the purchaser files a foreclosure suit, the owner must also foot the purchaser’s attorney fees.

""

As far as I can tell this latest September 2013 Post coverage ( http://www.washingtonpost.com/sf/investigative/2013/09/08/th... ) isn't exactly anything new — it's just more stories about the same process continuing to cause trouble for folks with poor legal representation and very little spare money.

From a Legal Times blog post in early 2013 about the DC Council considering tax sale reform legislation ( http://legaltimes.typepad.com/blt/2013/01/dc-council-takes-u... ):

""

During a tax sale, investors bid on tax certificates for delinquent commercial and residential properties. After a six-month waiting period, the investor has another six months to sue the property owner in District of Columbia Superior Court. The property owner can pay the taxes, interest – the city charges 18 percent annual interest – and the investor's attorney fees to redeem their property, or face foreclosure.

An estimated 97 percent of owners redeem their property, so tax sales are viewed less as a way to buy property than as an investment opportunity.

""

So if I understand this correctly, it is indeed being claimed by local community advocates that if a homeowner has an unpaid $50 tax bill that is sold to an investor; and some creative accounting turns that bill into a $5000 bill; and the homeowner cannot find a way to pay the $5000, then the investor gets to sell the house and keep the proceeds. But this only happens for one in thirty tax sales.

If you would like to understand this process further and in particular understand whether the Post's latest reporting matches reality, I recommend you contact the AARP Legal Council for the Elderly — call their hotline at +1 (202) 434-2120 and they'll put you in touch with an expert. Alternately, you could try calling the media relations folks at Crowell & Moring LLP (three phone numbers listed at http://www.crowell.com/Contact ); they provide the mailing address for the "Alliance to Help Homeowners Maintain Equity" folks and would be able to get you in touch with someone who can answer your questions about the process.