Sheriff sale gone bad: What would you do?

Question

I've been buying at Foreclosure auction in Indiana (judicial state) with about 8 properties under my belt over the last couple years. I did a lot of homework and its been working out pretty well.

Last Friday I picked up a sale, went to check it out and the owner's son let me in to see the inside which I had not seen. I was excited to see lots of granite and tile.

Upon contacting the owner via the cell number his grown kid gave me he tells me that he paid the bank and it was not supposed to go through the sale so lines must have gotten crossed somewhere.

I asked if I could get back in to take some pictures when I realize that he is not planning to go anywhere. (should have take them first time in) He tells me no one is home. His son let me back in to take some to my surprise as his dad must have really thought no one was home or that I would just not try.

Getting to the point, the Sheriff tells me there was no cancellation attempt before sale started. Attorney for the bank calls me back later to say apparently he made a payment top the bank to try to save it, but they are not sure of the implications yet. Says in the past they have filed a court appeal to return my money to me and preserve the title for him.

First question: Do I have possession by virtue of the payment and receipt and court action? The court wont assist until I have the Sheriff's deed and the judgement indicates no further court action is needed for possession upon presentation of the deed and if occupier does not vacate at that time the Sheriff will assist. So it would appear that possession is not actually mine until the attorney for the bank prepares the deed and gets it to the Sheriff for me, correct? This comes into play if he decides to trash the place I figure.

Second question: Would you just make nice, walk away, and try again next sale? If the guy did what he was supposed to to save it and the bank or attorney dropped the ball on him then I'm inclined not to piss him off further. Especially after the promise of a couple bullets to the head if I come back in his house. On the other hand, its not my fault someone dropped the ball on him and if he doesn't trash it I could make 40- $50K. However it could be a drawn out court process too. Curious for your thoughts and suggestions.

Guy Gimenez · Answer

Do yourself a favor and seek legal counsel. This is not a matter to get a lay person's opinion...this is purely a legal matter that needs specialized legal knowledge by someone who is willing to help you get the matter resolved.

David Short · Answer

You can pm me and maybe I can help. Bought over 100 houses at Indiana Sheriff sales. You couldn't be a nice guy even if you wanted to. The courts will make the decision. Most likely you own the home and that will not change.

Bobby Beard · Answer

in your case I would have walked too. I personally wouldn't buy one with owner still living in it. They can take everything out and strip it to studs before giving possession and then your screwed. I only buy vacant or tenant occupied units. That's just me.

Bobby Beard · Answer

I have bought 3 on county auction site here in bay county florida. It's been a nervous experience but so far so good. I was watching a beach front condo and was ready to jump on it but the day before I spoke with HOA and found out the fees were 4 years behind and an assessment of 6k to boot. Roughly 30k total that would have to be paid on top of purchase price. Think God I did the research. I would have been crushed to find that out afterwards. They are scary deals and takes a gambler of sorts to get in. But the deals make it worth it. Example foreclosed at 158k assessment of 60K paid 13k.

David Krulac · Answer

@Trent Vanderzee You are wise to fold and fight another day. There was a case here that the owner appealed in court, file bankruptcy, and did everything possible to delay the proceedings. He was able to delay the ultimate sale for 9 years. You do not want to be the buyer of a property like that, and have your money tied up for all that time with no interest.

Trent Vanderzee · Answer

@Mike H. You are right there is less competition. One reason is just what you stated. It takes a risk-taker to buy sight unseen. Another is that cash up front is an entry barrier to a lot of folks.So the game is about edging out the next guy in information, as I see it. The more you can determine about the condition of the house, often without getting in it, the better. One recent house, for example, I knew the builder was primarily a track builder, but the home had a high efficiency furnace as evidenced by the PVC flues through the wall. Obviously built with upgrades, as a builder around here in the price range at that time was almost always using 80%. Then you figure if no one gets inside, all bidders have to anticipate the same amount of risk and no one wants to lose money, so the bid rarely goes higher than what would be a break even deal in a worst case scenario. The problem lately is the quantity going on the block is decreasing rapidly. So the deals are drying up and the competition will get hotter.I'm not keeping these, so LTV doesn't come into play. I flip as fast as I can and move on.My last purchase was in a desirable neighborhood at 264K and just listed it for 364900 after about $25K in taxes, upgrades, granite etc. The agent gets a piece as he is part of the team also, but it should be my best one yet. We enticed the outgoing owner to let us have a look around the night before the auction and even so, the bid was not going much higher. There were 2 or 3 other bidders that I beat out for it. About half of mine I have not gotten inside. Sometimes the door has been "opened" by someone before me. I make real sure to announce myself and that no-one is living there before going in though. Not worth getting killed over it.I let one go cheap to a competitor last month that will likely turn 100K for him in a couple months. It was just me and him, toe to toe. Not sure if he will be so kind in return someday. But those are the exception not the rule. And it takes an education and some homework to know the other risks of buying this way. They can often foreclose a second mortgage and sell at auction subject to a first mortgage or other liens or rights of redemption that survive the sale. (Different for different states)Lastly, one of the hardest parts is being the name and the face that has to tell the owners that have been scratching to hang on in many cases that it is time to go. Just being in that place at that time requires empathy and sometimes tough skin for the threats and curses.

Trent Vanderzee · Answer

@Rusty Scott The Sheriff's office was able to make things look like it canceled and keep it out of court. I had put them on notice and they held my checks until I and the attorney agreed to it. Quickest way out and have my capital back for the next one. I'll always wonder what might have happened. I just figured no matter if the bank and or the attorney screwed up, if the owner made a payment they would let him keep the house. And whatever ounce of flesh they might award me from the attorney or bank would not be worth the pound of endeavor. But,... I'll always wonder.

Mike H. · Answer

@Trent Vanderzee This one seems to be an odd duckling. But what I'm really curious about is what its like buying homes you can't get in. And, even on the ones you can, you're never sure what kind of condition the house will be in when you actually get possession?What kind of LTV's do you think you're ending up in the 8 houses you've bought at auction? And does it not scare the snot out of you paying cash for a house that you've never been in?Just think the concept is one that I can never wrap my head around. I definitely see the potential to pick up some great deals considering the assumption that you're going to have far less competition. But, man, to buy something sight unseen just throws me a bit so I'm wondering what kind of deals you're actually getting and how you're able to mitigate the risk of taking a bath should one of these be a nightmare inside?Do you only buy stuff that you can get inside of?

Rusty Scott · Answer

Any update?

Trent Vanderzee · Answer

Thanks @Guy Gimenez. Looks like case law Finucane vs. Union Planter's Bank indicates they will probably set aside the sale and return my cash. I just hope its not even close to a 4 year process like another thread on the BP forum :)Funny though their attorney was picking my brain about what it looked like inside. I hope hes not on BP reading my last post.