Has anyone been successful at the sherriff sales?

Question

I've been to the last two sherriff sales in our county but I just observed.  It seems like the only people bidding are the lawyers.  Has anyone been successful at these auctions and did you have to get the people out who were living there?

Geof Greeneisen · Answer

Mariana Skonieczka

I've been going to the sheriff sales here in our county for the past 2 years with mixed results. In 2011 I bought 5 first lien notes, all of which had seconds on them and all of them failed to be redeemed, so I successfully got possession of the houses.

2 of those houses I negotiated with the owners to remain as tenants who to date have never been late on a payment. 1 house was vacant, I filed an affidavit of abandonment and took possession in 30 days instead of waiting for the 6 month redemption period in MI to expire (not sure if the abandonment provision applies to purchasers at sheriff sale, but the risk worked out for me). The last 2 houses I waited 6 months, took possession and did a minor rehab and lease-up. All of these acquisitions were accomplished at almost half of what I have been able to buy using the MLS.

Since Fall of 2011 the discounted notes that seemed to be plentiful at sheriff sale all but dried up. Volumes have been down and banks do not appear to be discounting like before. I suspect banks have shifted to short sales rather than sheriff sales. Even on the MLS volumes are down and prices are going up in our market. I haven't seen any of the shadow inventory that was anticipated in our area but maybe it's on it's way.

Even at sheriff sale there is very stiff competition and due to the complexities of the due diligence required I view the bidders as highly sophisticated buyers. Certified funds for the entire amount of the opening bid is due at the sale. A friend of mine purchased a second lien thinking it was a first and lost $15k. Be very careful when bidding.

The downside for me has been the time commitment. I have driven by every house in my market going to sale, performed title review and attended the sale each week for 2 years. That's 100 sheriff sales and I have only successfully acquired 5 houses from that amount of work.

I think sheriff sales offer great opportunities to acquire properties. You need to know what you're doing and be careful not to overpay.

Steve Babiak · Answer

Maybe. There are many different types of liens going to auction at the sheriff sale in PA. The rules for different lien types do vary in PA. And the lien position is the most important thing after knowing the rules for that type of lien; if you end up bidding on a junior lien position, you then become responsible for paying off all liens that are more senior in position.

Jordan DeGusipe · Answer

Do you still need to pay off the mortgage if you buy a home at a sherriff's sale in PA? Love a house coming up via the sherriff's sale, but it's got a 200k mortgage on it!

Trent Currie · Answer

My first deal was at a Sheriff's Sale. The first position bid the highest. Post auction I approached him and made a cash offer appropriate for the property. They liked the offer and the deal was done within the week.

Rob M. · Answer

Thanks for the response Geof. I will contact my attorney forsure. I guess I was thinking that if the quick claim states that she is also terminating the six month redemption period that it would also end the redemption period as well for the second lender. I was also under the impression that the foreclosure of the first automatically wipes out the second. The second mortgage was roughly 100k and they will receive 26k from the first loan forclosure as it went over that much at auction.

Geof Greeneisen · Answer

Rob McGregor,

Congratulations on your purchase.

While buying a note with a second on it can protect you from other investors during the redemption period, you need to be careful about how you "buy" the owners rights. I would put a call into your attorney. If you buy their redemption rights, depending upon how this is written, it could put the second mortgage back into play. Quit claiming their interest may do the same thing.

You may be better off paying them cash for keys, not purchasing their rights, rather paying them simply to leave prior to the 6 month redemption period, and leaving the house undamaged and in a broom swept condition.

Rob M. · Answer

@Geof Greeneisen

Hello

I live in Michigan and have recently purchased a house, which I intend to live in, at a sheriff's sale. Since you seem to have experience in doing this I was wondering if maybe you could answer a few questions for me. I would really appreciate it. The home I purchased had two mortgages on it with two different lenders, both of which were foreclosed. The sheriff sale was for the first mortgage and the lender put in their bid amount and I bid higher and received a sheriff's deed. I know there is a six month redemption period in Michigan, which I do not want to wait for the pass and I fear the house may be torn to shreds by that time. I contacted the current owner who is still living in the home and offered her 5k to sign a quick claim deed and vacate the premises, to which they agreed. The sale went over the first lenders opening bid by 26k. I assume that the 26k will go to the second lender as there are no back taxes or any other liens on the property.
 
1. By her signing the quick claim deed will that end the redemption period?

2. The second lender did not attend the sheriff sale nor bid on it. Can they still claim the property during the 6 month redemption period?

3. Can the second mortgage do anything at this point to stop me from taking possession?

Monica Breckenridge · Answer

At our auctions the houses get bid up very high.  You need to use your own cash to make the deals work.  And the ones you do buy, another investor redeems you buy buying a lien.

Stephen Masek · Answer

The party is over in some areas.  We attended one on January 30 in Las Vegas for a few hours with a real estate agent we know who had made money on buying at the sales, fixing, and flipping.  We saw the end of it that day - people bidding so high that there was little or no money to be made.  One guy even bid high on one we knew had a great big tax lien, so his research was no good.

Joel Owens · Answer

Mariana,

Very different sales with foreclosure sales versus REDC,HUDSON and MARSHALL,etc.

This are auction houses that will sell anything mostly.

The foreclosure auction is the actual attorney for the lender or the lender themselves usually foreclosing at the court house steps.The lender bids a minimum amount and if nobody bids above them they take back the property to sell REO.

2 very different types of processes.

Has anyone been successful at the sherriff sales?

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