Luzerne County officials plan to eliminate a controversial discount for private sale bidders who want early dibs on tax-delinquent properties.

The sales are allowed by law between first-stage upset tax auctions that require payment of all liens and back taxes and free-and-clear sales, when all liens and back taxes are forgiven.

Private sale buyers must accept outstanding mortgages or liens, but the county has required them to pay only half of the taxes owed.

Under a change up for discussion Tuesday, private sale buyers must start paying all outstanding taxes owed.

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The council also plans to pass a memorandum requiring county tax-claim operator Northeast Revenue Service LLC to obtain council approval before publicly advertising proposed private bid sales.

Council Chairwoman Linda McClosky Houck raised the issue, saying she was “astounded” to see a recent legal advertisement about a proposed private sale with “low” prices that had not been discussed by the council.

This advertisement announced plans for West Hazleton resident Anthony Bonomo to purchase five Hazleton residential properties for a combined $9,420.

Bonomo had purchased seven Hazleton properties for $11,700 in a private bid sale last year, records show. The council was not involved in that package because the county administration did not start bringing tax-delinquent sales to the council until May 2015. Northeast Revenue had planned to seek council approval on Bonomo’s proposed sale to the council this month before seeking final court approval.

McClosky Houck said many prospective buyers may be unaware private bids are an option. The county and other taxing bodies also risk losing out on revenue if they charge only 50 percent because the county’s free-and-clear auctions have become increasingly popular, she said.

Last year’s August free-and-clear auction drew a record attendance of prospective bidders, prompting officials to hastily move the sale from a courthouse jury room to the larger rotunda. The bidding went so high on some properties, including a few in Hazleton and Wilkes-Barre, the delinquent taxes were paid in full with money left over.

Real estate investor Steve Franco recently told the council he has purchased 25 properties at seven county tax auctions and was never informed of the private bid option.

Private sales are advertised in legal notices that may not be noticed by other prospective buyers, which could prevent competition that would force a special private bid auction among two or more interested parties.

Franco described this “over-the-counter way of buying property” at half of the taxes owed as a “dark horse” and questionable “loophole.”

“That’s scary that someone can get that advantage,” Franco said.

The proposed new county policy also stresses private sale bidders must pay all current taxes that become due before a deed is issued. Private bid amounts often are calculated during the year before sales are completed, which means taxing bodies miss out on any recovery of current-year taxes.

Bonomo said Monday the discount on taxes was justified in his purchases because he was on the hook for costly sewer and water bills left by prior owners and major repairs needed to make the properties habitable, including the replacement of plumbing and electrical systems destroyed by vandals. He said he does not expect to submit more private sale bids if all back taxes must be paid.

“These properties are the worst of the worst. They are not $100,000 or $200,000 houses,” he said. “It’s not the money-making venture I thought it would be.”

Northeast Revenue is supportive of the changes, officials said.

Some Pennsylvania counties, including Berks, require payment of all outstanding delinquent taxes in private sales.

McClosky Houck
http://www.psdispatch.com/wp-content/uploads/2016/07/web1_McClosky_Houck_use-cmyk.jpg.optimal.jpgMcClosky Houck

By Jennifer Learn-Andes

jandes@timesleader.com

WHAT’S NEXT

The Luzerne County Council will discuss the private bid sale change at Tuesday’s work session, which follows the 6 p.m. voting meeting in the council meeting room at the courthouse in Wilkes-Barre.

Reach Jennifer Learn-Andes at 570-991-6388 or on Twitter @TLJenLearnAndes.