How to read Sheriff's Foreclosure Sales...

Question

Hi all,

I recently discovered biggerpockets.com and have been tearing through the web site reading anything and everything--what an amazing resource. I'm not an investor at this point, but I've been thinking of taking the plunge lately and have even contacted a realtor I know to tour some local listings (sfr's). I'm seeing a few properties that I think are decent buys, but nothing that knocks my socks off.

I have now begun looking through my county sheriff's web page to investigate foreclosure auctions and recent sales, but I'm a bit confused as to what I'm finding. The county conducts auctions every Tuesday and Thursday, and as I look back at last week's results, I see nearly every listing as the plaintiff bid and the winning bid being the same...in other words, someone is just buying the property at the price listed by the plaintiff (bank). When I then look up these properties, I'm not really seeing many that are 'deals' at all...in fact, most of them are selling for the average prices in their respective neighborhoods. Moreover, every single property has a sold price, implying that they ALL sold at the minimum of the bank's initial price (and a few went higher). How is this possible?

If anyone has some experience with this process, please explain if you don't mind. If it clarifies things, here is the link: http://apps01.lakecountyil.gov/sheriff/foreclosure/Default.aspx

Thanks in advance for any help.

Drew

Jon Holdman · Answer

The ones where the winning bid is the same as the plaintiff's bid are ones where the lender took them back.  There were no real bidders.  The ones where the winning bid is higher than the plaintiff's bid actually sold to someone.

Wendell De Guzman · Answer

Eric Michaels, I never liked bidding at auctions because the bank almost always buys the property back at their asking price. And of course you cannot inspect the inside prior to bidding.

I have better luck with preforeclosures (and then negotiate a shortsale) and REOs. Is that your experience also?

Steve Babiak · Answer

I'm not familiar with that specific state or county, but I'll give you answers; some of this stuff is quite similar all over, and some is quite local.

But I suggest you start by reading this next link:

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

When you buy a junior lien position at sheriff sale, all senior liens remain intact.  So if you bought a second, you'll have to pay off the first (or deal with the first in some way to have clear title).

A sheriff sale has the effect of extinguishing the lien for the foreclosed lien and all liens junior to that foreclosed lien.  If you bid on a first and win, then the second is extinguished.  If you bid on a second and win, any third (or worse) position lien is extinguished, but you still have the first lien in place.

Answers to #3 and #4 will be local, so I can't say for certain.  Your wording for #3 sounds like you are on track; the link I posted above will give more info to guide you.  For #4, in my area I would look at the court docket for the foreclosure case, and see which mortgage it is from there. If you can't get access to that docket, then there are some "hints" you can gather from the plaintiff information, but the same plaintiff could have given several loans to the same borrower on the same property, so you can't be 100% certain if that occurs.  Don't forget that there are mortgage assignments, satisfactions, lien releases, subordination agreements, etc that can make the picture of lien position a bit murkier.

Sheikh Zain · Answer

Hi,
Drew great topic, I have been wanting to ask the same question ever since last 2 years. 
Eric thank you for sharing your knowledge. Much appreciated.

I have just few question related to in dupage county sheriff sale.

1.) If the property bid opens at 70k, is this true that I have heard that if the 2nd mortgage files the foreclosure and you end up buying the property from dupage steps, you are responsible for the first mortgage? I think this is not true and 2nd mortgage cannot foreclose? can you please guide on this

2.) If there is a lien on the property by the smaller loan/2nd mortgage (20%), and you end up buying the property from dupage auction.. does the lien gets wiped out? or do they get whatever is left from the 1st mortgage/bid settlement? and if they do not get anything its cleared and wiped out?

3.) Is dupage assessors/recorder/circuit clerk and tax pin search county website the best webesite to find the liens against the property?

4.) How can you check if the first mortgage is the one who is foreclosing? how can you safely bid if you have the money in hand?

please guide.

again Thank you for all your guidance and help.

Eric M. · Answer

The level of competition is high no matter what.  Only when it is known that the property is rented does the interest go down.

Sometimes the judge will allow immediate possession if you have enough proof, but he always errs on the side of caution and for the homeowner.

Ryan O. · Answer

Eric Michaels, thank you that is all great information.  Has it been your experience that the level of competition is different between occupied homes and vacant ones?

I'm assuming if you can show evidence of a home being vacant, MLS pictures for instance, you could take possession at the confirmation hearing, correct?

Eric M. · Answer

Confirmation is never in 1 week.  It is typically at least 3 weeks.  Longer if a holiday falls in between.  Around Christmas it goes as long as 6.  Then typically 30 days to possession so about 7 weeks total.  However, the judge has lately been more lenient on the 30 days and frequently gives 60 so that makes it 11 weeks.  I am currently waiting on possession for a property where the owner was smart.  He first attended the confirmation hearing to ask that the sale be set aside because the price was too low.  That never wins but it gets an automatic 30 day hearing.  Then at the 30 day hearing, he shows up with his father in a wheelchair and asks for more time.  He got 90 more days.  So I purchased in early May and won't get possession until Sept 26.  
There is the opportunity to show up at the hearing as the buyer and plead your case, but in my experience, though it may save 30 days, it almost always guarantees a more trashed house from a bitter homeowner.  You have to argue to the judge in front of the homeowner that they should be kicked out early.  Makes you look like a greedy jerk to everyone, including the judge. 
Cash for keys is always possible to lessen the time, but less likely than you would imagine and other things can go wrong with that.

Ryan O. · Answer

Eric Michaels I'm in Dupage county as well, but have been focusing on buying REO's.  I am planning on accepting the increased risk and starting to look at the sheriff's sale as another method of acquiring property.  You mentioned that it takes 7 weeks to take possession in Dupage, are those occupied properties you have to evict home owners from?  It was my understanding that a deed was issued after confirmation (one week or so) and possession in 30 days or so.

Eric M. · Answer

Yep, that is how you do it.  Take a gamble on the inside.  Even if you do see the inside, it takes at least 7 weeks to get possession so lots of damage can be done.

Drew Heilig · Answer

So Eric, how do you buy in DuPage then? Any of these purchases would be sight unseen, no? At least the exterior. Would the strategy of looking at the upcoming auctions, and then physically eyeballing properties to see what condition they are in from the outside before the actual auction date be viable? Are they perhaps sometimes vacant prior to the auction, so you'd know there would be no immediate risk of occupants trashing the place after you've bought it?

I appreciate any insight you may have. I have a local property I'm interested in, but it would be my first investment. Looking at a buy & hold for rental at this time, but future flips interest me if I can get my head around things.

How to read Sheriff's Foreclosure Sales...

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