Pennsylvania Sheriff's Sale & Foreclosure Process

[James Triano]

Since I struggled so mightily in finding information about the Pennsylvania foreclosure and sheriff's sale process, I wanted to create a thread going through the process in detail in hopes that this may help someone down the road.

First, I've been looking into a property that's on my street (I'll post some info on the analysis I did and update it with progress) for quite some time now as it sat vacant. Finally, a notice was posted on the window that it was going up for Sheriff's sale. Intrigued, I looked into it for weeks and eventually convinced my wife to bid on the property - which we won. However, there are numerous things I learned throughout the process that I'd like to share:

1) The sheriff's sale is the legal process through which the bank (or foreclosing/selling entity - i.e. tax authority, lender, HOA) is able to regain title to the home. So, in many cases, when you go to the sheriff's sale, you're actually going to be bidding against some form of bank representation. Something I found during this process was that if you do your homework, you can determine the attorney that is representing the bank and who will be at the sale. In this instance, I actually convinced the attorney to tell me the bank's highest bid price so we knew exactly how to bid.

2) The bank will, in some cases, win the auction and then proceed to make any repairs on the home and list the property for sale. This is when the home becomes "REO" and is listed on the multi-list as a bank foreclosure. So, in this case, we were able to cut the bank out of the middle time period. There are, I'm sure, a ton of factors which will determine how much the bank will bid. In this instance, the home was FHA, so the bank (again, I'm assuming) didn't have much incentive to actually bid up the price because they're going to paid back through mortgage insurance.

3) The sheriff's sale was held in the hallway - yes, the hallway, of the courthouse. In some instances, it's held on the steps out front.

4) The bid is completely like a auction. It starts at one price and is literally auctioned off to the highest bidder - I don't know why but I thought it was more formal.

5) In PA, you must be 10% of the purchase price down immediately, that day. You only need your driver's license and a check. The additional 90% is due within 20 days of the auction. This gives you time to get funds in order and complete any other necessary items. For us, this means finalizing our business set up, business account, and aligning money.

6) I do think we made a mistake though. We did not do a formal legal title search before the sale. While this is a very low priced home so we don't have too much of a deposit at risk, I do think we should have completed the search before the sale. However, based on the current information that I know about the previous owner and all of the online research I was able to do, we should have a clean title.

All told, this was, at very worst a great learning experience, and at best it's a great deal and should make for a great flip.

What experiences do you have with Sheriff's sales? How does the process work in your state? Any advice on getting the title search/other work done before the actual sale?

[Victor Menasce]

A few questions and comments:

1) Is the sale a bank REO or a tax sale? You need to look at the deed specifically.

2) Did the Sherriff serve the original owner properly? The Sherriff's office in Philly is notorious for doing a bad job of serving the owners. That may give the original owner a right of redemption period.

3) In the case of a tax sale, the right of redemption period is 6 months after the sale. If they were not served, the right of redemption period extends to 21 years. There is no right of redemption on vacant land.

4) There may be other liens on the property. Some may get wiped out. Yes, you need to do your title work. If some of the liens are utilities, you may be able to negotiate them. I've been successful in getting a 50% discount in the past. 

5) Title insurance can be difficult to get on Sherriff Sale properties. Some title companies will only insure after a 12 month "waiting period". Without title insurance, no bank will loan funds.

Feel free to contact me if you have further questions. I routinely buy properties from the Sherriff sale, and yes, it can be complex. Hope that helps.