Saturday, July 12, 2014

Buyer learns free-and-clear tax sales have pitfalls

February 17. 2013 1:32AM

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Hazleton resident Dee Deakos said she lined up a buyer for a vacant Hazleton lot she bought at a back-tax auction last year, but the purchaser backed out because the property title wasn't clean.

She researched the auction paperwork because outstanding mortgages and liens were supposed to be forgiven at the free-and-clear auction. Deakos said the prior owner and another person who financed the mortgage were never properly notified of the auction as required.

Deakos said she found similar missing notifications on three other properties she bought at auction.

She's attempting to straighten out two on her own by contacting lien holders to negotiate resolutions and has filed legal action trying to force the county's tax claim operator to refund her money on the remaining two.

"The properties were supposed to be free and clear. They lied, plain and simple," said Deakos, who purchased the properties through her business, Pharmahouse.

John Rodgers, owner of Northeast Revenue Service LLC, the county's tax-claim operator, said his company painstakingly attempts to identify and notify all lien holders to the extent required by law, but some may fall through the cracks.

Rodgers said he advised Deakos she must file court action if she's seeking a refund, because a sale can't be reversed without a court order. A judge will determine if Northeast Revenue's service to lien holders was sufficient, he said.

Allowing refunds without court orders could open the door to other auction buyers who incorrectly argue the notice to lien holders was faulty when they actually regret their purchases because of the work and money involved, Rodgers said.

"One of the reasons our company was hired was because the county didn't want anyone to receive preferential treatment," Rodgers said.

Northeast Revenue backs up buyers of auction properties if lien holders challenge their purchases, he said.

For example, Rodgers recently appeared in Commonwealth Court to argue a financial institution was properly notified of a property's listing at auction. The institution, which had an outstanding mortgage on the property, is asserting the sale should be nullified because the notice wasn't issued to a specific department or employee within the institution, he said.

Research recommended

Northeast Revenue also added wording to the August free-and-clear sale listing emphasizing prospective buyers should research property titles before they submit a bid to ensure everyone with a claim was notified.

Deakos said the only strong warning when she purchased the properties from two auctions in 2011 was that there were no guarantees on the condition of structures – which she understood.

Her lawsuit seeks $21,000 she paid for a house at 200 E. Broad St. in Hazle Township and $940 for a vacant lot at 43 N. James St. in Hazleton.

Deakos said the current mortgage holder of the house was not notified of the sale and won't release the claim, even if she pays part of the $113,000 owed by the prior owner. Hazle Township also wasn't notified and has demanded Deakos comply with a delinquent order to hook up the property to a municipal sewer line, she said.

"I can't put in a sewer line if the mortgage company is going to foreclose on the property," she said, noting she also had a prospective buyer for the structure.

Deakos said proper auction notice wasn't issued to a mortgage holder, the owner or Hazleton city on the James Street lot. The city had a $9,000 lien against the property for demolishing a structure on the site, she said.

"They sent a constable to the empty lot to serve the owner, and if they had looked in the records, they would have seen he lived in a high-rise," she said.

Deakos came to last week's county council meeting to inform county officials of the issue but said she had to leave before public comment.

"Buyers of back-tax properties should be aware before they sink a lot of money into them that they may not be able to officially own or sell them," Deakos said.

Researching properties

• Luzerne County's next free-and-clear back-tax auction is scheduled for Nov. 7.

• The special sale is for roughly 170 properties the tax claim operator pulled from an August free-and-clear sale to ensure all lien holders were properly notified.

• A list of available parcels will be posted at

• Prospective buyers may obtain information on outstanding liens against a listed property at the county prothonotary's office on the second floor of the courthouse.

• Bidders may then visit the Tax Claim Office on the first floor of the courthouse to verify all lien holders have been notified of the Nov. 7 sale.

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