How to evaluatre sheriff sale deals

Question

Hello everyone,

I am new to real estate and I am interested in preforeclosures and sheriff sales. I have read several books on real estate that explain the basics, but neither going into much detail on sheriff sales in particular.

My biggest question is how do you evaluate each potential buy and how do you determine the max amount that you are willing to pay with site unseen? Do you still follow the normal rule 70% of ARV - repair costs? How do you estimate repair costs, given that you have not seen the house on the inside? How do you weed out the properties, where you are unlikely to get a deal? For example, is there a certain (judgement amount owed)/(ARV) % that you could use as a rule of thumb to decide whether to research a sheriff sale listing any further. As far as I understand, banks usually start the bidding at the judgement amount owed. Is there an ARV (absolute amount) under which any house is unlikely to be a good deal? For example if ARV is $80K and judgement amount owed is $40K, the listing may look like a good deal. However we are talking about a margin of only $40K here even though percentagewise it is impressive 50%. Price of building materials and labor is the same regardless of the ARV of the property.

Is it possible to talk to homeowner in preforeclosure stage to get access and inspect the property?

Could hard money lending potentially be an alternative to all cash buy in a sheriff sale transaction?

Are there any books or materials out there that specifically focus on buying properties in preforeclosure stage and sheriff sale?

William Hochstedler · Answer

Buying at auction is not a sport for newbies.  It's as blind as you can get.  There are lots of big $ pitfalls that you can encounter: second mortgage foreclosing, HOA foreclosing, other title issues, IRS liens, collapsed sewer pipes, burst water pipes from improper weatherization, to name a few.

Start here

Absolutely try to contact the borrower pre-foreclosure.  It's your best bet in getting some insight into the property and you may be able to help them in the process.

Understand your state's foreclosure laws and what filings are required to start the process.  This is how you can identify distressed borrowers earlier than the notice of sale posting.

Good luck!

Matthew Ennis · Answer

Not sure if anyone still uses this but I’m brand new to all of this and been doing a little research and I’m confident this is what I’m made to do!! I’ve ran into a good amount of money and am looking into sheriff sales…I’m seeing mixed reviews stating it’s a great way to start off or thee exact opposite. I’ve scanned Zillow in my area and with the market being how it is now I just feel reluctant to buy something a little more pricier….but with that said you at least know what you’re getting by having access to the inside of the home. Sheriff sale access is limited and god knows what could be lurking inside lol… so with that being said anyone want to help a newbie and give me some advice?? I’d really appreciate it!! Thank you guys!!

Account Closed · Answer

Great way to jump right in to real estate investing is going to sheriff sales. I would go to county auctions and observe for at least 3 or 4 times. Check out who is bidding on the properties, there are regular guys at all of these things. My first house that I bought at a sheriff's sale I only saw a picture of it online, but there was plenty of bidding at the auction so I put my hand up. I owned it 30 days later and it took me a year to finish all the repairs. It is now rented out to a nice section 8 tenant and I have that income coming in every month. I had no idea what I was doing but I went out of my comfort zone and learned as I went. Better than reading about how other guys are investing in real estate.

Brian Compton · Answer

I'm not sure if there are any books that speak specifically to buying preforeclosures, but buying in preforeclosure is not that different than buying any other property as an investment. Often it can get more complicated (sub2) than a straight cash deal if they owe as much as the property is worth, but JV with a savvy investor and they can help you through the deal. My first few deals as a wholesaler were sub2s. Not so much by choice, but because of their situation cash offers didn't work and sub2 did.

To the preforeclosure point, the best thing to do here is to buy a list a do a direct mail campaign to them. Send letters and / or post cards. Be persistent (mail to each lead multiple times). If you get a lead, go meet with the seller the same you would a normal distressed seller. Here in NC you get about 90 days from seller receiving their NOD (notice of default) to the auction date (which can easily be extended). As a noob, I'd steer clear of the auction steps like the folks above suggested. Unless you want to go with zero dollars just for experience.

Best of luck!

TImothy Talarico · Answer

There are a lot of good deals to be had at Sheriff Sales but you really really have to do your homework.   You can really get burnt if you don't.   You should also learn who the sharks are at these events...meaning they go w/ big pockets, or slum lords or high end brokers,etc.   You have to know what you want and if you know the right people....you can usually get into a lot of these houses.   If you want to more offline you can email me and I'll do what I can to help.  I work in PA with a lot of these.

Cory Tressler · Answer

I personally stay away from sheriff sales. The properties worth buying get bid up so much that it's not worth the risk. I prefer to get to them before a sheriff sale occurs. Not saying you cant find a good deal because you can I just don't like having so many unknowns. If they have a property report I am more inclined to go after the home. So far direct mail campaigns have worked best for my business.

How to evaluatre sheriff sale deals

Most Popular Reply