sheriff sale?

Question

im attending my first sheriff sale in philadelphia next week.  on the website the sales are either mortgage forclosure or a tax lien sale.  with the tax sale the owner has a right of redemption.  but with a mortgage forclosure the highest bidder gets the property.

i have researched sheriff sales and one catch was that you can bid on a property and assume ownership for 7k or whatever the price is...and under that assumption is the condition may vary widely.  im confused about the whats "cleared" with the sheriff sale...

i was under the impression that although the house might have missing copper and missing wires and and a compromised roof, the title would be clean??  isnt that the purpose of the sheriff sale?  is it possible to buy a house for 7k but have 25k in back taxes and its your burden??  who runs title on 8 properties they plan on bidding on at the auction??  i was on the cities website and you can find if there are back taxes owed but i cant believe you can just get every lien and judgement assessed when you win a sheriff sale auction??

Kris Haskins · Answer

wow such great thoughts to ponder on bp.  Yes hence the double edge sword,to do a title search or not.  I pray that u do.  Had a friend really get burned from not doing one.  Oh yeah, u can buy redemption rights too, by the way....   but for sherrif sales, we simply do a current owner plus 1 owner back.  Typically that will be good enough as the current lender thats 4closing wouldn't hv lent if it was bad title.  It does cost but that's the price of making 40k plus.  Even worse,  in our area sellers can get sales stopped the same day.  Sometimes we're stuck with a bunch of usless searches.  Id recommend always doing the current plus 1 owner back....   u could be buying a 2nd mortgage,   that would hurt...   if this info helped in any way, pls vote for my post...    good luck, knockem dead.....

Wayne Brooks · Answer

Step 1:  Buy an hour with a local RE attorney who deals with foreclosure buying clients, specifically.

Step 2:  See Step 1

Yes, property taxes always survive any type of action, period.  You'll also need to worry about any utility type liens, which always survive, other govt liens that may survive, any HOA debts, and make sure it is a first mortgage that is foreclosing, as if it's a second mortgage or HOA, the first mortgage stays with the property.  This is for mortgage foreclosures.  Some of those liens may not be recorded.  Tax deeds/liens are a totally different animal in every state.

Did I mention to sit down with a knowledgable attorney?

Chris K. · Answer

@Pixel Rogue

1. Outstanding Debt. Foreclosure attorneys may sometimes miss liens or other interest holders that they need to otherwise divest. Some attorneys mess up when they need to name the United States of America as a defendant (requires the attorney to be aware of very specific procedural rules that overrule PA procedural rules). I suppose once in a while you can find a foreclosure sale that's for a junior sheriff's sale (meaning you would buy the property subject to a first-lien mortgage). So buying at a foreclosure sale doesn't always mean that you will have a marketable title.

2. Strategies. If you have the right connections, you can get the upset price before the sale from the foreclosure attorney. Talk to your lawyer contacts about whether they have a good relationship with the foreclosure attorney. I recall one of the foreclosure firms listing the upset price for the properties that they handle.

3. Title/Legal Review. See Paragraph 2. If you have the contacts, you can get the upset sale amount. Go from there to decide how much due diligence you have to do. Note that sheriff's sales will always pose a certain level of risk. That's why you can find "deals" (or at least what appears to be deals).

4. Stay/Continued. Again, you can talk to the foreclosure attorney to see what the chances are.

5. Funds. It depends on the County, but many counties allow attorneys to write a personal check instead of a certified check. Some counties restrict this "right" to the members of the local county. For example, see Montgomery County:

http://www.montcopa.org/413/Real-Estate-Sheriff-Sa...

6. Overall Advice. Others may disagree with what I say here. But my experience has been that most investors who succeed in foreclosure-sale investing generally specialize in that area of investing. I see the same traits with tax-sale investors. They also tend to focus on a specific set of counties instead of looking all over the state. By narrowing their focus, they are able to strike when they find the deal.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it as legal advice. Always consult with your attorney before you rely on the above information.

Steve Babiak · Answer

The seminar that @Mary B. mentioned are at this next link:

http://www.officeofphiladelphiasheriff.com/en/real-estate/upcoming-seminars

Tax lien sales at a Pennsylvania sheriff sale come in two flavors - "subject to" and "free and clear"; tax lien sales from the County Tax Claim Bureau also come in those two flavors, but differ as to redemption rights and when a deed is issued to the buyer.

So, you want to be sure that your bid will be for a tax lien that you really want.  No fun to buy one "subject to" with a mortgage that survives.  Somebody just did that this month in my county's sheriff sale - two mortgages in that instance survived.

As Mary also mentioned, rights of redemption only apply in specific situations.  Property must have been owner occupied as owner's residence.  Court rulings in PA already have struck down an appeal from a tavern owner who lived upstairs and wanted to redeem; property was commercial, not residential in that ruling.  Redemption period is nine months from date of deed recording; another court ruling denied redemption to somebody who attempted to redeem a few days past the nine months when that person was mistakenly told redemption was one year from the sheriff sale date (although that is the typical timeline for redemption rights to expire, the law states very specifically how to determine the nine months redemption period).

So commercial properties have no redemption rights, and rental properties also have no redemption rights unless the owner lived in one of the units in a multi-unit building.

Some further reading here:

http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq

Mary B. · Answer

Rights of redemption applies only if the property was occupied at least 90 days prior to the date of the sheriff sale. If not those rights are waived.

My guess is you're going for observation and networking purposes. I agree with those that recommend title search and attorney usage prior to bidding is important. Those are key players that should be on your business team. If they aren't now you should be scouting for sure.

Additionally there is a seminar after the auction starting at 1pm the same day of the auction on Jan 7th on the how tos. Q&As are very likely. The website states the seats are filled but I'd still check the day of for some no shows if you really want to learn more about them.

Kudos,

Mary

Wayne Brooks · Answer

Assuming the second mtg is named/served, they get wiped out and just receive any surplus left over, if any.  Mortgage position is determined by recording date of the mtg........first in time, first in line.

Robert Leonard · Answer

Have you been to a few of the sales @Joe Boggin? It's a good place to meet some really advanced cash buyers, but not a place to go to figure things out?  There's a huge amount of risk involved because you are buying sight unseen in most cases.  Even if a property goes to auction that you saw when the previous owner tried to sell it before they got to this point, you don't know what they (or vandals) did to it before the sheriff's men went out to lock it up?  There are so many unknowns that, unless you are in a market where there are few buyers to drive up prices, your efforts are usually better spent on other methods to buy properties.

Most of the time, the bank's rep will be there to bid up to a price that's above the FMV, but has more to do with foreclosing to make a mortgage insurance claim.  The same property will end up getting sold as an REO at a lower price than what is bid by the bank rep at the auction.  The bank doesn't actually pay the amount they bid, just a commission to the sheriff based on the amount the winning bid.  If a property is sold to a bidder at the sale, the bank gets the amount of the bid less the costs of sale and the sheriff's commission.

Go to the sale.  Get there early and talk to the pros there and learn, learn, learn.

Pixel Rogue · Answer

Thank you Chris...

Pixel Rogue · Answer

Rebooting thread:

I tried to get foreclosed once, as a complete novice and ended up learning a little (but mostly a waste of time).Delaware County, PA (so hello to the other Delco folks here (aka Steve Babiak)

We were already somewhat familiar w/the house we wanted to buy (ok buying it as is w/o inspections etc etc).

The property, however, was underwater. The owners were a couple who paid a bit too much when they purchased. They took out a second loan... then the couple split up and abandoned the property. It sat for ages, weeds growing on the inside...true fixer upper.

The bank had more money vested in the property via loans than the property was worth. The attorney would bid the upset price (above market, foolish to pay). Then the property seemed to get listed again weeks later... rinse and repeat. Eventually gave up attending the court sessions for the attorney to wave a paper and the property locked up again for period of time.

Newbie questions:

1) Outstanding DebtListings show debt. many show what appear to be primary (large number) and secondary (small number). Even w/those numbers listed, some are saying have a title company (and/or lawyer) review as there may be other leans. Wouldn't any leans need to be listed on a basic sheriff sale?

2) StrategiesAny strategies to minimize wasting time on a property the bank will bid upset price? Maybe wait a period of weeks/months for change to the numbers, or a lawyer sitting quiet instead of bidding upset?

3) Title / Legal ReviewShort of leans on a title, what other key gotcha's are you looking for prior to bidding? Naturally do the homework, be prepared to accept as is, have a basic understanding of its market value and such... which factors would be required to hire a professional (as the point would be to keep costs as low as possible)....(and then everything is made worse if you are paying professionals to research, when the bank lawyer bids upset already.)

4) Stayed / Continued Frustrating when the property of interest keeps hitting a stayed or continued status, lawyer always bidding upset price. What is the right way of thinking about this, the stayed and continued? How do you work w/in these factors w/o driving yourself crazy?

5) FundsIf you are only interested in 'one' property, well you can have the certified check ready to go. If you have interest in more than one (but only buying one of options), are you expected to have separate certified checks for each property of interest, and just hand the one over? Any other methods where you are not preparing so many certified and draining resources when you are only buying one?

Joe Ebanks · Answer

@Wayne Brooks

What happens if its the first mortgage foreclosing, but there is a second or third mortgage. Lets say the first mortgage has 50k on it, 2nd mortgage has 50k. And you bid 60k and win the house. Do you owe 40k more?? Or would they just get 10k, and you would get the title?

How do you tell which mortgage is in first position?

Thanks!

sheriff sale?

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