Starting Out buying homes at Sheriff Sales

Starting Out
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Starting Out buying homes at Sheriff Sales

Nickey Ramsey
Lafayette, IN · Member since 2015 · 14 posts · 1 vote

Hi BiggerPockets!

When purchasing a home at Sheriff Sale I know and understand the importance of being able to determine that the house is free and clear of all judgments and liens (federal, state, and local level) before placing a bid. However, I also feel that it is more important for me to do the research on all the properties that I am interested in myself. We have a few title companies that charge around $325.00 per home search (I know Title Companies do a great job and more work goes into searching homes than just searching for liens and judgements). Sometimes we may see 5 homes at Sheriff Sale and want to bid on all 5 homes, the opening bid doesn't show up on the home right away and I find myself gambling on paying a Title company to do a search on all the homes and risk either them coming up to high for what we are willing to pay or possibly getting cancelled. For this reason I find it difficult to "throw" away money to do Title searches on homes that aren't being purchased.  I know this should be a simple decision and process, but yet I am still finding myself torn on what to do! How many of you other investors out there do your own searches or use a Title Company? If you do your own searches would you mind sharing the steps you take to ensure the home you are bidding on is clean and clear and ready to go?

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Michael Hayworth
Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
10y

NOTE: Not legal advice, and not specific to your state. You'll need to do your own research.

When I started out buying homes at Trustee Auctions (the Texas version of your Sheriff's Sale), I limited myself the first few months to ones repped by Auction.com. They publish a title search along with each listing on their website (the link that says Foreclosure Property Information). It looks like they have 6 properties in your upcoming sale:

https://www.auction.com/residential/foreclosures_a...

Once I got more familiar with the process, I found that my county has moved all their records online, so it's relatively simple to do my own lien searches on the county website. It takes some work to weed through the results, but it gives you what you need to know. That enabled me to feel comfortable looking at properties auctioned by other trustees.

When I'm doing a search, I'm specifically looking to ensure that:

  • The lien being foreclosed is the FIRST lien. Search BP and you can see many stories of people far overpaying for 2nd liens, HOA liens, and other things that won't give them clear title to the property.
  • There are no significant city, county or state liens against the property.

I don't worry about private liens, as they'll be wiped out in foreclosure. 

I don't worry much about IRS liens, because I've never heard of them actually exercising their 120 day right of redemption, although they technically have that right. (If I'm planning a fast flip, instead of a hold, I do pay attention to this.)

I don't totally avoid small city, county or state liens - I just price it into what I'll pay for the property.

Trustee Auctions are a mixed bag. I've had some properties that have done very well for me. I've also had properties that required far more in repairs than I expected - just finishing a complete repipe on one that cost me $5K I hadn't anticipated. It wouldn't be the first place I'd recommend someone start, but it's been a decent source of properties for me, and I'm currently doing my research for the one Tuesday in my area.

Good luck.

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  • Curt DavisBusiness Member
    Flipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
    10y

    Having a great relationship with your closing company helps to keep title search fees low. 

    Curt Davis - KAIZEN Realty538 Reviews
    WebsiteView Page
    0Reply
  • Mindy JensenPro Member
    BiggerPockets Money Podcast Host · Longmont, CO · Member since 2014 · 7k+ posts · 10k+ votes
    10y

    In Colorado, the title companies will do an O&E (Ownership & Encumbrances) search for $5-$10. It obviously isn't as in-depth as you would get for title work during a closing, but it gives a quick snapshot of the property. Talk to your title company and ask if they provide this service, too.

    [email protected]Podcast Guest on Show #261
    BiggerPockets
    0Reply
  • Michael Hayworth
    Contractor · Fort Worth, TX · Member since 2015 · 379 posts · 740 votes
    10y

    NOTE: Not legal advice, and not specific to your state. You'll need to do your own research.

    When I started out buying homes at Trustee Auctions (the Texas version of your Sheriff's Sale), I limited myself the first few months to ones repped by Auction.com. They publish a title search along with each listing on their website (the link that says Foreclosure Property Information). It looks like they have 6 properties in your upcoming sale:

    https://www.auction.com/residential/foreclosures_a...

    Once I got more familiar with the process, I found that my county has moved all their records online, so it's relatively simple to do my own lien searches on the county website. It takes some work to weed through the results, but it gives you what you need to know. That enabled me to feel comfortable looking at properties auctioned by other trustees.

    When I'm doing a search, I'm specifically looking to ensure that:

    • The lien being foreclosed is the FIRST lien. Search BP and you can see many stories of people far overpaying for 2nd liens, HOA liens, and other things that won't give them clear title to the property.
    • There are no significant city, county or state liens against the property.

    I don't worry about private liens, as they'll be wiped out in foreclosure. 

    I don't worry much about IRS liens, because I've never heard of them actually exercising their 120 day right of redemption, although they technically have that right. (If I'm planning a fast flip, instead of a hold, I do pay attention to this.)

    I don't totally avoid small city, county or state liens - I just price it into what I'll pay for the property.

    Trustee Auctions are a mixed bag. I've had some properties that have done very well for me. I've also had properties that required far more in repairs than I expected - just finishing a complete repipe on one that cost me $5K I hadn't anticipated. It wouldn't be the first place I'd recommend someone start, but it's been a decent source of properties for me, and I'm currently doing my research for the one Tuesday in my area.

    Good luck.

    3Reply
  • Ryan Mullin
    Real Estate Broker · Indianapolis, IN · Member since 2009 · 575 posts · 496 votes
    10y

    In my experience a title company wouldn't move fast enough to be effective on auction day.  In Indy the bids come out at 10am - 10:30 and money has to be in by 3pm and then auction starts at 3:15.  

    I typically drive 8 - 15 deals as fast as I can.  Some I know I don't want so I waist no time getting out and looking or doing any research.  When I find a deal I text it to the office to have my assistant / office manager look up the parcel number and check on board of health and code enforcement status. We look to make sure that if there are repair orders or fines on the property, if so that they are manageable.  

    The 2 scariest things (for me) about sheriff's auction are buying a second mortgage (if there is a 100k home and the mortgage that was defaulted was 10k...  its probably a second) and buying the wrong parcel (1 address can have 2 parcels..  be careful..).  Both can be avoided with good research - I personally think it should be done back at the office with help of someone not dealing with the stress of auction day.  

     I can't really picture trusting a title company to get this done that fast and that accurate.  They wouldn't be insuring anything so it would make me really nervous. 

    For me auction is a tool to use when you are looking to acquire at least 20 or 30 properties a year. If you are looking to do a couple a year I would source deals through wholesalers, direct mail and MLS... that way you can do as much research as you want and close through title.

    1Reply
  • Linval T.
    Investor · Bay Shore, NY · Member since 2014 · 1k+ posts · 688 votes
    10y

    @Nickey Ramsey

    This is certainly a learning process for you I imagine, coupled with the fact that your approach is flawed and expensive.

    My theory is that you can't boil the ocean, so, with that said you have to focus on a subset of the properties that you are really, really, really interested in acquiring before disposing of your hard earned cash that will not result in a bid.

    The key here is that you have to be a disciplined investor who sticks to a budget and bid within your limits....period!

    Ok, so I got really involved with your question and did some additional research on BP. I found the below post on the topic of doing your own title searches. It has some excellent info in it and worth the time to read all the comments.....I did.

    https://www.biggerpockets.com/forums/48/topics/136...

    Additionally, I added the below blogs that will expand your education and propel your REI career as well.

    https://www.biggerpockets.com/renewsblog/2009/10/29/tax-lien-certificate-money-tree/ (tax Liens)

    https://www.biggerpockets.com/renewsblog/2009/10/30/times/ (Auctions)

    https://www.biggerpockets.com/rei/foreclosure-process/ (The foreclosure process)

    https://www.biggerpockets.com/renewsblog/2015/07/03/oncetwiceaewin-real-estate-auction/ (How to win at real estate auctions)

    https://www.biggerpockets.com/renewsblog/2007/7/26/how-to-find-out-if-there-are-any-liens-on-a-property/ (How to find out about liens)

    0Reply
  • Jamin Stokes
    Wholesaler · Grand Rapids, MI · Member since 2012 · 5 posts · 0 votes
    10y

    You are on the right track and line of thinking.  There is no way a title company will be quick or cost effective enough.  Learn how to do a title search right and you will be able to confidently bid on what comes to your sale.  It can be scary at first but remember, the people working at the title company regular people too.  There is no magical "title search" button.  They actually have to sit in front of a computer and do it just like you do.  

    My point is that this is a skill that can be learned.  In the beginning I was super nervous about screwing one up but now, after doing a few thousand of them, it becomes second nature.   You can do it.

    0Reply
  • Nickey Ramsey
    OP
    Lafayette, IN · Member since 2015 · 14 posts · 1 vote
    10y

    @ Michael Hayworth so let me get this right, Auction.com provides an already searched Title for you before you attend an online or live auction on there website? Thanks

    0Reply
  • Nickey Ramsey
    OP
    Lafayette, IN · Member since 2015 · 14 posts · 1 vote
    10y

    @Linval T. Thank You for posting links to similarly asked questions and providing your professional insight. 

    0Reply
  • Nickey Ramsey
    OP
    Lafayette, IN · Member since 2015 · 14 posts · 1 vote
    10y

    I have my question answered! I realized that you can't be an expert at everything and I am okay with that! So I may leave the title searching up to Title Search professionals. A small mistake could cost you more than just $$$, but take you out of the game.

    0Reply
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