The sheriff's sale is the last step in the foreclosure process. It's also usually the opportunity to acquire a property at the lowest possible price. But that opportunity doesn't come without substantial risk. Because of the risk, buying at sheriff's auctions isn't something I recommend but it is out there and others do it so I want you to be aware of how to minimize the risk.
Unlike tax liens, few if any sheriff sales are conducted online. You or a representative must be physically present at the sale. However, you can research properties coming up for sale online. Before the internet, sheriff sale information was and still is physically posted on the front door of the property, published in the legal section of a local newspaper, and a copy can be viewed at the sheriff's office.
However, what is available online (or from the other sources) is generally the minimum amount of information that local laws require. Typically the information provided is:
Also, the sheriff's website usually has a description of the auction process. This includes the time and location of the auctions, the minimum payment that must be made immediately following the sale, acceptable forms of payment, when the full payment must be received, and local laws that apply such as if and how long of a redemption period there is. Also, look for information about costs the sheriff's office incurs and how these are repaid.
Being able to contact the attorney for the debt holder is valuable information. Many counties wait until two or three days before the auction before the final amount of debt has to be posted. By contacting the attorney, you can usually get a good idea of how much this will be. This is typically the lowest amount that will be accepted, although a lower amount may be accepted if the lender doesn't want to take possession of the property. If the lender will accept less than the full amount owed, the attorney is not likely to share that information but they have no reason to conceal the amount owed since that is all the lender is allowed to keep.
Also from the attorney, you can learn if the property is still occupied or if it's vacant. If occupied, you'll want to know if it's the owner or a tenant. If it's occupied and you are the winning bidder, the eviction becomes your responsibility. If it's the owner, there will be another part of the sheriff's sale process that goes about it - usually it means obtaining another court order. If it's a tenant, you can either negotiate a new lease or follow the local eviction process.
If the property is vacant, the attorney may or may not have the authority to allow you to view the property prior to the sale. This is not common but it's allowed in some counties.
Not all sheriff sales are mortgage foreclosures. Others include tax liens and court judgments. These often sell for much less than foreclosures. A tax lien sale is for unpaid property taxes. Typically, back taxes are much less than a mortgage. Because it often requires less money to redeem the property, these are more likely to be removed from the sale at the last minute if the owner can pay the taxes.
Court judgments result when a third party wins a lawsuit and is able to force the sale of the property. Because of homestead laws, these are most likely to be investment properties. The lowest acceptable bid is going to be the amount of the judgment plus any accrued interest and other allowable fees.
Finally, something else you want to research is if there are any other liens on the property. The place to begin this online research is with the county office of recorder of deeds or the equivalent at your location.
Sheriff's auctions are a high-risk method of acquiring investment property at a deep discount. If you decide to go this route, be sure to avail yourself of as much research as possible.
Brian Kline has been investing in real estate
for more than 30 years and writing about real estate investing for seven years.
He also draws upon 25 plus years of business experience including 12 years as a
manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington.
A vacation destination a few short miles from a national forest in the Olympic
Mountains with the Pacific Ocean a couple of miles in the opposite direction.