Best Way to Secure Financing for Sheriff Sale/Auction Property?

Question

Hello, I wasn't quite sure which forum to post this... I am a licensed agent here in Ohio, and have a client who has absolutely fallen in love with a property going up for county sheriff auction in less than 2 weeks.  It's definitely a fixer-upper, but nothing that seems too outrageous.  A lot of cosmetic stuff.  Still, I don't know how a bank would view it for the purpose of providing a home loan.  The county appraised it at $45,000 which means an opening bid of $30,000 (2/3 of appraised value), and they require 10% of appraised value paid upon winning the auction so my client would need $4,500 day of auction.  She then has 30 days to come up with the remaining balance.

So fellow BiggerPockets members, does anyone have experience obtaining financing on sheriff auction properties?  I realize most buyers at county auctions are cash buyers.  She has been pre-approved by 2 local banks for $70,000 and $80,000, so unless there is a bidding war on auction day my client can "afford" to take out a mortgage on the place.  The other issue is that the 10% (or $4,500) upon winning the auction that she would owe is essentially the money she has saved up for a down payment, so she might not have enough for another 3.5% or 5% down on a mortgage.  She just recently applied for a loan from her credit union to help with that $4,500 (since the courthouse doesn't care where that money comes from) and was approved for $2,500.  I also know she also shouldn't be applying for other credit while seeking a home loan, but she didn't know what to do to come up with the extra money.

We scheduled a home inspection in 3 days.  Both banks she's spoken with said that an inspection report would help them determine if they could provide financing.  The auction is in less than 2 weeks, so time is of the essence.  Any advice would be appreciated!

Eric P. · Answer

Older thread but I came across this and figured I'd mention my thinking.  If you want to finance the property and can't make it happen through the actual auction get the information on the person that won the auction and talk to them directly after.  So for example:

A house in town I really like had a value of like $220k, sold at auction for $104k.  Unfortunately I don't have that kinda capital yet.  What I can do now is contact the court house to find out who purchased the home as its public information.  I can call them directly and ask if they'd like to sell it.  This gives you the benefit of being able to actually walk the property and inspect it without blindly bidding.  If it all works out maybe I offer the guy $120k.  He makes a quick $16,000 with no work, I get to inspect the property before buying, and I get to finance.  Could just work...

Darrin Wesenberg · Answer

Well, we won the property at a bid of $74,000.  More than we had hoped but still a good deal.  We gave a $4,500 check to the courthouse leaving a balance of $69,500.  We're hoping the local bank we've been working with will approve the loan once we can get inside for an appraisal.  Otherwise we'll have to explore other options like maybe a hard money lender.  Here is the property, in case anyone's interested: http://www.zillow.com/homedetails/28-Oak-St-Delaware-OH-43015/33751246_zpid/

Steve Babiak · Answer

My mistake in not looking at the mortgage itself - it was an FHA rehab mortgage that was used to make the purchase. So not quite "conventional", but maybe could have been if the property condition was satisfactory already.

Steve Babiak · Answer

so you still could have trouble getting the appraisal, even though there is access now that could go away. Did the occupants already move out?  And then what happens if somebody outbids her?  She will need to have a max bid where her financing is a certainty to pay, otherwise ...

Mayda Guardado · Answer

That’s a great idea! There’s this sheriff sale in one week they I’m thinking of attending for the first time here in NJ. I’ll most likely lose the bid to these investors but I’ll try your stance.

Taylor Jones · Answer

Steve,

From reading your posts, it doesn't sound like conventional financing is the standard for auction properties. I'm looking at bidding on houses on Montgomery County PA, and they have a 10 day payment deadline. Is it at all feasible to get a loan processed in 10 days? If so, do you know of any lenders in the area that could expedite the process. I am looking at a few homes I expect to go in the 200-250 range (just guessing based on knowing area values and what I can see from the sidewalk at the houses). I have about 40k, but the rest would have to be financed. Thanks for any advice.

Steve Babiak · Answer

For those who have been following this topic, link below shows new owner from county tax assessor website:

https://www.co.delaware.oh.us/services/reportservi...

And link below shows the mortgage that was recorded for this purchase:

https://cotthosting.com/ohdelaware/LandRecords/pro...

So it CAN happen that a buyer gets a conventional mortgage loan to fund a sheriff sale purchase, though unlikely for most sheriff sale purchases.

Jessica Hood · Answer

@Darrin Wesenberg How did this turn out for your buyer?  Were you able to get the appraisal/inspection the lender needed and did you get funded in time.  I am also researching the same route.

Sandra Morrison · Answer

I am wondering how this turned out.  We bid on a house and have a contract but are not sure we will be able to close before the sheriff sale.  We are looking into hard money lenders that would loan money for 30 days or less on a property in Northern KY.  Inspections are done and appraised higher than contract price and MUCH higher than starting auction bid.  Any suggestions?

Kevin McKeown · Answer

@Darrin Wesenberg How did the financing turn out? Were you able to get an appraisal done and secure financing in time? If so, how long did it take and who did you find financing with? Thanks!

Best Way to Secure Financing for Sheriff Sale/Auction Property?

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