Luzerne County may revisit tax-delinquent repository purchase procedures

A few purchase offers stick out in the latest batch of tax claim repository sales before Luzerne County Council because they are noticeably above the usual $500 or $1,000.

The highest is an $87,250 offer for a residential structure on Lawrence Street in Wilkes-Barre.

There also are offers of $30,050 for a property on Salem Street in West Pittston and $25,600 for a structure on Dexter Street in Hanover Township.

While most parcels end up in the repository because no bidders wanted them in popular tax auctions, these were valuable enough to prompt bidding competition at auction.

However, they still went to the repository because the winning tax auction bidders never paid — a situation that has been occurring more often.

As a result, council’s Real Estate Committee and the tax claim operator are both interested in revisiting the county’s repository procedures to determine if changes are warranted to maximize returns.

Current scenario

To understand what happens in this scenario under the current county procedures, here is a synopsis of how the $87,250 bid for the Wilkes-Barre property came to council, according to information from public records and tax-claim operator, Elite Revenue Solutions:

Assessed at $62,500, the property was listed in the September 2019 first-stage upset sale, when bidders must pay all delinquent real estate taxes and municipal liens and accept responsibility for any outstanding mortgages and nonmunicipal liens attached to their purchases.

The minimum bid was set at $16,758.75, and nobody bid.

Due to issues serving required notice of the sale to the owner and/or lien holders, the property did not advance to a free-and-clear, or judicial, auction until April 2022. Free-and-clear auction properties go to the highest bidder without mortgages, liens, utility bills or other past claims attached.

The starting bid was $2,608.48 to cover the cost of bringing the property to sale, and bidding escalated to a final price of $120,000 from a bidder who did not pay after the auction.

Bidders who don’t pay are banned from participating in future county delinquent tax sales,

Following standard procedures, Elite promptly posted a report on its site that includes properties that did not sell, identifying which involved bidders failing to pay.

After a five-day waiting period following the auction, the county’s policy requires tax claim to accept bids on properties that did not sell for five days. These sealed bids must be above the starting bid at the auction, which in this case was $2,608.48 for the Wilkes-Barre property.

Twenty-two sealed bids were submitted for the Lawrence Street property during the five-day period. Anabel Alvarez submitted the highest bid of $87,250 that is now before county council.

The 1,716-square-foot residential structure on 0.13 acre has three bedrooms and one bath, county assessment records show. It was constructed in 1929 and last renovated in the 1960s.

If this bid is accepted by council, the proceeds would first cover the $25,582.24 in delinquent taxes collectively owed to the county, Wilkes-Barre and Wilkes-Barre-Area School District, said Sean Shamany, of Elite Revenue.

Following the state’s real estate tax law, any remaining surplus funds would cover other debts attached to the property, such as mortgages and municipal liens. If there is money remaining after that, it would be paid to the person or entity losing the property due to the delinquent taxes.

Policy change

Councilman Kevin Lescavage, vice chairman of council’s Real Estate Committee, said he believes more public exposure of the unsold properties is needed to ensure all prospective buyers are aware of the purchase option.

In addition to possibly attracting more offers, a widespread listing would eliminate any perception that the properties up for grabs are known only to those familiar with tax sales, Lescavage said.

“We need to make this more mainstream,” Lescavage said.

He also believes a sign should be posted at each property to let neighbors and passersby know these parcels are available for purchase.

Maximizing purchase prices through competition will ultimately help taxing bodies, Lescavage said. Although taxing bodies are capped at receiving the amount of delinquent taxes owed, the assessed value of repository properties is linked to the purchase price due to state law.

When repository properties are sold, the purchase price automatically becomes the new assessed value for taxation. State law says the purchase price of repository properties “shall be deemed to be the fair market value of the property for tax assessment purposes.”

This law was designed to encourage repository purchases because most properties that typically end up in the repository are rundown structures, land slivers or large undeveloped parcels with access problems or other hurdles, officials have said. The county has approximately 1,000 repository properties available for purchase at any time, which is more than other similarly-sized counties in the state.

Under the county’s repository policy, properties that don’t attract bids during the initial five-day window remain available at the free-and-clear minimum bid for three months after the auction.

Once the three months has lapsed, the minimum bid drops to $500 for vacant lots and $1,000 for parcels with a structure. Sealed bids are again accepted for five business days in the rare event that multiple buyers are interested due to the price reduction.

After that, repository properties are available for purchase at any time at the $500/$1,000 minimum. Regularly updated, the list of available repository properties is posted at luzernecountytaxclaim.com.

Lescavage said he plans to propose doing away with the $500/$1,000 minimum because he believes some would offer more if a minimum is not stated. Although the reverse is possible — bids below the current minimum — he said council always has the right to reject offers if it believes they are too low.

Previously a flat $500, council had raised the minimum bid to $1,000 for repository properties with structures several years ago.

Councilwoman LeeAnn McDermott, who chairs the real estate committee, said she will schedule discussion about the repository purchase procedures at the next committee meeting because she believes the matter is worthy of review.

Councilman Tim McGinley, also a committee member, said he wants to make sure the public at large is aware of the opportunity to purchase the properties. He suggested the committee invite Elite Revenue representatives to a meeting to discuss the issue of auction bidders not paying and the company’s recommendations on how council can address any concerns through policy changes.

Councilman Carl Bienias III, the remaining committee member, also supports reevaluating the procedures, saying he believes available post-auction properties should be prominently featured on the county’s website.

Shamany said Elite Revenue is open to policy revisions at the direction of the committee and/or council.

Even though the properties involving no-pay bidders already are publicly posted on Elite’s website after every sale, Shamany said the county may want to consider more public announcements and visible posting on the county website.

Bidders are failing to pay more often, he said.

He believes this stems largely from more inexperienced bidders failing to fully research prospective purchases. Some rely on general property address searches instead of county parcel identification numbers, which are the only sure way to verify which property is being sold. Address searches may lead bidders to wrongly conclude they are buying a structure appearing on a non-county real estate database, when the parcel is actually an empty lot, he said.

In the most recent free-and-clear auction in August, bids were received for 59 of 65 available parcels, but 10 did not pay.

The April 2022 free-and-clear drew bids on 151 of 173 available parcels, but 18 did not pay.

Bids were accepted for 176 of 210 properties in the August 2021 auction, when at least 17 did not pay.

County council received the latest batch of 67 proposed repository purchases in December, but a vote was delayed and has not yet been scheduled.

As with the Wilkes-Barre property, the second and third highest offers also stem from bid winners who failed to pay at the April 2022 free-and-clear auction.

The proposed purchases are listed under council’s Dec. 13 work session agenda at luzernecounty.org.

According to this list, Bovo Rentals B&B LLC is offering $25,600 for the property on Dexter Street in Hanover Township. The property is assessed at $53,900 and carries $8,111 in delinquent taxes.

In West Pittston, Stanley Ray Shaffer Sr. submitted the highest sealed bid — $30,050 — to purchase a property on Salem Street that is assessed at $82,900 and carries $20,021.29 in delinquent taxes.