Starting Out buying homes at Sheriff Sales

[Nickey Ramsey]

Hi BiggerPockets!

When purchasing a home at Sheriff Sale I know and understand the importance of being able to determine that the house is free and clear of all judgments and liens (federal, state, and local level) before placing a bid. However, I also feel that it is more important for me to do the research on all the properties that I am interested in myself. We have a few title companies that charge around $325.00 per home search (I know Title Companies do a great job and more work goes into searching homes than just searching for liens and judgements). Sometimes we may see 5 homes at Sheriff Sale and want to bid on all 5 homes, the opening bid doesn't show up on the home right away and I find myself gambling on paying a Title company to do a search on all the homes and risk either them coming up to high for what we are willing to pay or possibly getting cancelled. For this reason I find it difficult to "throw" away money to do Title searches on homes that aren't being purchased.  I know this should be a simple decision and process, but yet I am still finding myself torn on what to do! How many of you other investors out there do your own searches or use a Title Company? If you do your own searches would you mind sharing the steps you take to ensure the home you are bidding on is clean and clear and ready to go?

[Michael Hayworth]

NOTE: Not legal advice, and not specific to your state. You'll need to do your own research.

When I started out buying homes at Trustee Auctions (the Texas version of your Sheriff's Sale), I limited myself the first few months to ones repped by Auction.com. They publish a title search along with each listing on their website (the link that says Foreclosure Property Information). It looks like they have 6 properties in your upcoming sale:

https://www.auction.com/residential/foreclosures_a...

Once I got more familiar with the process, I found that my county has moved all their records online, so it's relatively simple to do my own lien searches on the county website. It takes some work to weed through the results, but it gives you what you need to know. That enabled me to feel comfortable looking at properties auctioned by other trustees.

When I'm doing a search, I'm specifically looking to ensure that:

• The lien being foreclosed is the FIRST lien. Search BP and you can see many stories of people far overpaying for 2nd liens, HOA liens, and other things that won't give them clear title to the property.
• There are no significant city, county or state liens against the property.

I don't worry about private liens, as they'll be wiped out in foreclosure. 

I don't worry much about IRS liens, because I've never heard of them actually exercising their 120 day right of redemption, although they technically have that right. (If I'm planning a fast flip, instead of a hold, I do pay attention to this.)

I don't totally avoid small city, county or state liens - I just price it into what I'll pay for the property.

Trustee Auctions are a mixed bag. I've had some properties that have done very well for me. I've also had properties that required far more in repairs than I expected - just finishing a complete repipe on one that cost me $5K I hadn't anticipated. It wouldn't be the first place I'd recommend someone start, but it's been a decent source of properties for me, and I'm currently doing my research for the one Tuesday in my area.

Good luck.