A history of insider dealing and misconduct
The Philadelphia Sheriff Department has long struggled to move tax delinquent properties, many of which are vacant lots or abandoned structures, and has faced allegations of political favoritism and insider dealing within the auction process in the past. It also has a long history of misconduct and criminal allegations, including suits that averred the office failed to return excess proceeds to some that had lost property at auction.
While properties in gentrifying areas may sell for hundreds of thousands of dollars at auction, the city is only legally entitled to collect on the amount of tax or mortgage debt owed through sheriff sales. The remaining proceeds are supposed to be refunded to former owners through an internal unit known as the Homeowner’s Asset Recovery Team, which the Sheriff says returned about $3.82 million in excess sales proceeds to individuals in 2019.
On a Monday town hall teleconference, Undersheriff Curtis Douglas acknowledged the new system would increase the pace and profitability of sheriff sales, framing this as a boon for the HART unit and homeowners that lost property.
“It increases the number of potential bidders, thus potentially increasing the number of properties sold as well as the price of individual properties sold. This puts more money into the city coffers and into the pockets of the homeowners,” Douglas said.
A spokesperson for the Sheriff, Greg Salisbury, said Tuesday that the office was aware of concerns from groups like CLS, but reiterated Douglas’ point that more efficient sales would help distressed homeowners.
“While we are, of course, concerned with how this restart will affect property owners already straining under the weight of the pandemic, by law, we must execute the orders of the court,” he said. “The HART program has been effective in ensuring residents have not only the information they need to save their home, but also in the refunding process.”
He acknowledged that, while Philadelphia has never once held sheriff sales online, the office elected to make a permanent shift due to $17,250 in monthly cost savings and other advantages.
Salisbury said, prior to the pandemic, the office had previously held in-person auctions at a building known as First District Plaza, in West Philadelphia, leasing a conference room for $10,000 a month. The Hospital of the University of Pennsylvania had leased the building, the auction contract expired during the pandemic and was not renewed.
The office had also previously contracted an auctioneer for $4,000 per month and spent $3,250 a month for “staff lunches” associated with each sale.
The Sheriffs office pitched the new arrangement as a “no cost” contract, as Bid4Assets takes a cut from sales –– a 1.5% buyer’s premium for mortgage foreclosure sales and 10% for tax sales, levied atop the final sale price. Buyers would also now be required to put down a $10,000 deposit to bid on a mortgage foreclosure property or $1,500 for a tax sale.
“The convenience, cost savings, and transparency afforded by the Bid4Assets model are too compelling to ignore,” Salisbury said. “And with online sales, there can be no favoritism or bias.”
But, while the arrangement might reduce costs for the city, Sgro and other advocates said they would have to wait and see if the new arrangement was actually better for distressed property owners.
During the townhall, Douglas revealed that it was HART Unit director Denean Hardy who had first mentioned the idea of switching sales over to Bid4Assets. Hardy was fired from the city’s Finance Department in 2010 in the wake of a probe into a parking ticket-fixing scandal for allegedly destroying tickets issued to family members.