can you explain this sheriff sale auction?

Question

Hi BP

Today I attended my first real sheriff sale.
It was in a courthouse on Pittsburgh.
The volume was overwhelming, 3 hrs long!

It was a great experience,
I did limited due diligence enough to figure out what's going on.
or should I say keep up ;)

I'm home now and looking over some of the properties that sold:

Can you, if possible, explain this deal?

1. Old business(Apr '13), MTG foreclosure, judgement $400k

When it opened: lady bid was 150,400.15 (GOT IT)

Question:
1. What did she buy?
2. What happens to the $400 judgement.

I checked MLS, value on street in $187-299k. House not listed.

2. Old business (Mar'13) School tax lien cost tax $179k, cost 10k
FREE & CLEAR min bid 6,000

When it open: bid up to 18k SOLD
The bid started at Cost
Question:
1. How does tax lien work?
2. What does Free & Clear mean?
3. If lien was 179k, how much does bidder have to pay at the end?
4. Do you get the house with tax lien?

Other deals were new homeowner bidding up to 140-230k
Most withdrew and bank buys at cost
Most no bidders and bank buys at cost.

Thanks in advance

Jerry Kisasonak · Answer

Steve Babiak I was aware that if the property was vacant at the time of the sale there was no redemption period. I wasn't aware that it needs to be occupied for 90 days prior to the sale in addition to being occupied on the day of sale in order for the redemption to apply. But, I'm sure in most cases if they occupy it on the sale date there's a good chance they've been there for the prior 90 days. If an owner claimed that they were living there on the date of the sale and in fact they weren't, I'm sure it would be hard for an investor to prove otherwise. After all, even if there's no utilities on, the owner could claim that they were staying there without them. The facts are one thing, substantiating them are another. I also read about the non-owner occupied and commercial. There's definately lots of nitty gritty nuances to the laws. I suppose that's why you wanted to avoid the topic altogether : ) Thanks for all your help Steve. Much appreciated.

Steve Babiak · Answer

Jerry Kisasonak - 90 days right of redemption is only Allegheny County; the rest of the state it's 9 months. You have to "let sleeping dogs lie" with these - don't go near the place even if it will tip off the owner to redeem; they will redeem if they have the money, and often they do have the money but just ignored or forgot some municipal bill or tax bill. And you have to work the additional hold time into your cost structure; that's why the winning bid in the OP was really low relative to ARV of the house. There are some of those that don't have any redemption; re-read regarding vacant / blighted, non-owner occupied, commercial property ...

Steve Babiak · Answer

In PA, municipal liens that go to sheriff sale and are bought by a third party come with rights of redemption in certain cases. You have to read the statutes that established "MUNICIPAL CLAIM AND TAX LIEN LAW" and in there you can read about rights of redemption. http://www.legis.state.pa.us/WU01/LI/LI/US/PDF/1923/0/0153..PDF On page 19 of that document is where the "free and clear" sale is given. Redemption is on page 25.

Steve Babiak · Answer

Chris Martin gave a pretty good explanation; I would change the word "prior" that he used to be the words "superior position"; a subordination agreement can come later in time, but change the lien priority. In PA, almost every plaintiff attorney's bid starts at "costs", so that is nothing significant to even consider; the minimum bid the sheriff will accept is one that covers the costs of the sheriff holding the sale. On the "free and clear" sales in PA for municipal liens, the buyer gets the deed for the bid amount, with all liens and encumbrances of record being considered satisfied; this is he result of a judicial decree that you can find in the case docket at the prothonotary (except in Allegheny County, that title was merged into some other gov't job). The judicial decree to remove all liens comes about due to the municipal lien going unpaid, and failing to get any bidders at sheriff sale on prior attempts to sell there WITHOUT extinguishing those other liens. The $6000 opening bid covers the amount of the municipal lien and costs of the sale; amounts over that would disburse to other lienholders in priority order. Of course, this is the type of sheriff sale that in PA comes with redemption rights ... redemption rights are a bit too complicated to discuss.

Chris Martin · Answer

I am not in a tax lien state, so not sure how that $18K applies toward outstanding liens. As far as the mortgage foreclosure, it sounds like the winning bidder at $150,400.15 would get the deed, subject to prior liens and encumerences. If the sheriff was instructed to start bidding at below the judgement award, the consideration to the plaintiff (the lending bank) would be the winning bid less any extra costs associated with the sale. I am in a trustee state and not familiar with the intracacies of your state law, but that's the gist of how the process works.

Steve Babiak · Answer

Jerry Kisasonak - that's EXACTLY why, and you're welcome.

Jerry Kisasonak · Answer

Steve Babiak Good stuff. Thanks! That 90 right of redemption is a killer. I was surprised to read that it applies even to the free and clear sales. No way around it!

Jerry Kisasonak · Answer

Steve Babiak I was reading your post and finally thought I was going to get a good explanation of the redemption laws in PA. I have heard differing stories on this and have been wanting to get to the bottom of it. Seems like not today!