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What is a Sheriff’s Sale? An Investor’s Guide

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Real estate investors who aren’t afraid of a little competition may want to explore sheriff’s sales as a means of securing their next great deal. But don’t be hasty! It’s important to prepare well and understand the process first. 

What is a Sheriff’s Sale?

A sheriff’s sale refers to a real estate selling event that is conducted by the local sheriff’s department. Properties are sold in an auction style, with bids driving up the sale price. The highest bidder gains ownership of the property. 

Properties may end up at a sheriff’s sale due to the owner’s failure to pay their mortgage, taxes, liens, or other debts associated with the home. Because sheriff-sale homes are often sold below market value, attending this type of sale can be a good strategy for real estate investors. 

Many sheriff’s sales are held in person, either at the sheriff’s office or at the county courthouse. Some sheriff’s sales are conducted online. All sheriff’s sales are open to the public, meaning anyone can attend and bid on properties, but proof of funds is usually required for participation. 

How is a Sheriff’s Sale Different From a Foreclosure Auction?

While both a sheriff’s sale and a foreclosure auction are conducted in similar ways, the difference between the two lies in their oversight. Foreclosure sales are usually overseen by the lender (or, more likely, the lender’s representative) who reclaimed the property after mortgage non-payment proceedings.

In contrast, sheriff’s sales are governed by the local sheriff’s department at the direction of the local court. The court may rule for a sheriff’s sale to satisfy cases against the defendant (property owner). Plaintiffs in such instances may include but are not limited to, the mortgage lender, meaning there could be a number of parties that have a claim to proceeds from the sale. 

From an investor’s perspective, a sheriff’s sale and a foreclosure auction are pretty much the same. The details and requirements of each auction vary slightly, but buyers can expect a similar process (discussed below) at each.  

What Types of Properties Are Auctioned at Sheriff’s Sales?

Investors can find several different types of real estate opportunities at sheriff’s sales. Residential properties, including single-family homes, condos, townhouses, and smaller (2 to 4-unit) multi-family dwellings, are most commonly included in a sheriff’s sale. However, sometimes commercial properties or larger multi-family buildings are auctioned off as well. 

How Can an Investor Find Out About a Sheriff’s Sale?

The timing and frequency of sheriff’s sales differ by location, so you’ll need to contact your local sheriff’s office for more details. Some locales only conduct sheriff’s sales every few months, while others hold auctions each week. 

You often can view property details for upcoming sheriff’s sales online via the sheriff’s department website. A physical list may be available at the department, and properties are usually published in local newspapers as well. 

Properties are identified by number (either a sheriff’s number, docket number, or case number), address, and legal description. The plaintiff and defendant may also be listed, as well as the “upset price”.

An upset price is the minimum sale price that will be accepted for a successful auction. An upset price may be higher or lower than the “judgment amount”: the amount determined by the court to be owed by the defendant.

Listings for upcoming sheriff’s sales should be advertised well in advance (giving the owner time to make amends); this gives investors plenty of time to prepare for the sale date.   

What Should an Investor Do to Prepare for a Sheriff’s Sale?

Prior to a sheriff’s sale, an investor should focus on two things: research and funding.

1. Gather Information

Because properties at a sheriff’s sale are sold “as-is”, investors need to do as much due diligence as possible before bidding. 

Because of tenancy and trespassing laws, it’s usually impossible to get inside the home, much less have an inspection done on the property. Still, it’s in your best interest to at least drive by the address and do a “curbside” inspection. See what you can see from the public sidewalk, but don’t step foot on private property.

In addition, you’ll want to run a title search before auction day. Look for any liens on the property which will transfer with ownership. This might include anything from federal IRS liens to water bill liens.

These liens may be included in the court case (and thus satisfied by the auction), but not always. Also take note of any open permits, since you’ll likely need to pay to have them closed. Title information is public knowledge, so you can track it down yourself or get assistance from a title agent or real estate attorney.  

2. Obtain Necessary Funds

How much money should you bring to an auction? The answer varies based on the particular requirements of that auction. Before attending the sale, you’ll need to familiarize yourself with the amounts necessary as well as the accepted payment methods.

Some jurisdictions will require payment in full at the time of sale. Others only require a certain percentage as a down payment (such as 10%), along with proof of loan pre-approval. In some locations, it’s possible to obtain an FHA loan for a sheriff’s sale property. 

Sheriff’s departments will have their own requirements for how the funds are transferred as well. Personal checks are not generally permitted, so investors will often bring cashier’s checks to a sheriff’s sale. Because the final price is unknown (due to the bidding process), it’s best to bring several checks in incremental amounts to make the final payment.  

As an investor, it’s also essential to run profitability numbers up front, so that you know the point at which the property ceases to be a good deal. Our Cash-on-Cash Return guide is a good starting place.  

What is the Sheriff Sale Process?

The process of a sheriff’s sale may look slightly different based on local norms, but in general, buyers can expect the following steps:

  • Advertisement. The property is listed as coming up for auction in a sheriff’s sale. This means that the court has ruled against the defendant and turned the property over to the sheriff’s department for auction. Now is the time to do your due diligence on the property and set a max budget for bidding. 

  • Bidding. On the posted date and at the specified place, the auction begins. Since the order of an in-person auction is not typically publicized, you’ll want to arrive early so as not to miss out on the bidding for your intended property. 

  • Winning. The sales price increases as interested parties make their bids. Sometimes a lender or lender’s representative takes part in the bid, either in an effort to buy back the property (and in turn recoup more funds) or to drive up the price. When the predetermined time for bids is over and/or the highest bids are in, the property auction closes. 

  • Fund Transfer. If you are the winning bidder, you then make the necessary payment and receive some sort of proof of your purchase. Often this comes in the form of a “sheriff’s deed” (though terms vary), which shows your temporary claim to the property prior to the official closing. Alternatively, some jurisdictions write a receipt of sale for properties paid in full, which is then used to obtain the deed from the courthouse. 

What Happens After the Sheriff’s Sale?

The closing process after a sheriff’s sale also varies by location. Some sheriff’s sales will require closing within 30 days; some require less; some allow for more. You will be given specific closing instructions at the time of sale, though it’s in your best interest to research the terms prior to the auction. 

In some states, the closing time corresponds with a redemption period offered to previous owners. This statutory redemption period allows the defendant one of two options to get their property back, depending on how the local laws are written.

Some states require full payment of the judgment amount within the redemption period. It’s unlikely that the owner has access to this money, so closing should proceed as normal.  

Other states create more of a “matching” structure, where the defendant can pay the winning bid amount along with any auction fees to receive their property back. Since the sales price at auction may be much less than their original debt, some previous owners may exercise this right of redemption. If they do, the buyer loses claim to the property even though they won the auction. 

Assuming all goes well and no redemption rights are exercised, you will then close on the property and receive the official deed. At this point, the property ownership has changed hands, and you are free to take possession and make repairs as necessary. 

Is a Sheriff’s Sale Right for You? 

Some investors do well at sheriff’s sales or other auctions. If you’re good under pressure and okay with some uncertainty, a sheriff’s sale may be a great opportunity to find a nice deal. 

If the variables of a sheriff’s sale seem daunting, you may want to consider distressed properties or pocket listings as an alternative strategy. At New Western, we have access to some of the best off-market properties in the nation. If you’re interested in a great deal without the hassle, let us show you some properties that might be a fit for your portfolio.  

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Disclaimer: The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.