Buying via a Sheriff's auction

Buying & Selling Real Estate
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Buying via a Sheriff's auction

Jacob Lindgren
Investor · Springfield, IL · Member since 2022 · 13 posts · 2 votes

Hello all,

This morning I went to a sheriff's auction at my local courthouse. My only intention was to go and sit in the back to get an understanding of how the process worked. When I showed up I was the only person there other than the bank's rep and the court deputy that held the auction. I didn't purchase the property but I did feel as though I found a new avenue for deal hunting in my small town that seems mostly overlooked by my fellow land lords. 

I understand the basics of how the auction works and have a couple contacts in my area but I know there is a lot I could still learn. The process in my town is 10% down at the time of the auction and the remaining 90% in 24 hours. I also understand that I am buying the property sight unseen (aside from driving by) and that does come with its risks. My question to you all is what reading materials / podcast episodes should I be looking into to gain more knowledge or a general strategy? 

Thank you in advance for your input.

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  • Malcomb StapelPro Member
    Investor · Topeka, KS · Member since 2020 · 669 posts · 488 votes
    3y

    @Jacob Lindgren  the process in your state may be different, but look up and see if there is such a thing as "rights of redemption" in your state. It basically means if you don't have them, and someone else does, you may not be ending up with the house. We have a local Realtor who specializes in just these, which is who taught me the very little I know about them. I would recommended finding your local expert if there is one, and if not, look on youtube university. 

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  • Jim ReynantePro Member
    Member since 2023 · 53 posts · 24 votes
    2y

    Here's are a few things to consider when participating in a sheriffs sale/auction for real estate:

    Tax Trouble: When someone doesn't pay their property taxes for a while, the local government can put a lien on the property, which is like a claim to the property.

    Public Auction: The Sheriff's sale is like a public sale where anyone can try to buy these properties. They usually happen in a public place like the county courthouse.

    Minimum Price: The starting price for these properties is the total amount of unpaid property taxes, penalties, interest, and other costs. This is called the minimum bid.

    Bidding War: People who want the property bid on it, and the one who offers the most money wins. It can get competitive. In your scenario that you describes, there was no other bidders... which is a huge plus for you!

    Owner: If you win the auction and pay the highest bid, you get a legal document called a Sheriff's deed. This means you now own the property, but there might still be other debts on it.

    Redemption: In some counties, the old property owner has a little time after the sale to pay what they owe and get their property back. If they do, you get your money back plus some extra (e.g., interest, penalty fees). Please keep this in mind, do not make any upgrades on the property until AFTER the redemption period expiration. For example, let's say the redemption period for a property you won at auction is 6 months. Now during the 5th month, you decided to put a new roof on the property. Then, the original owner redeems the property after 5 month and 28 days have passed. The original owner get the property back, you get your original purchase price amount back plus the interest and penalties that were collected. But what about the $20k you spent for the roof? Unfortunately, that is a sunk cost and you lose out.

    Risks and Homework: These auctions can be tricky, so you need to research the property to know if it's a good buy. Look into the property's condition, its history, and any other problems.

    Rules and Laws: The rules for these sales can be different depending on where you are. Make sure you follow the rules and get legal advice if you need it.

    So, Sheriff's sales can be a way to buy properties at lower prices, but you have to do your homework and be aware of the rules and risks. It's a bit like a competitive auction for houses with tax problems.

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  • Jacob Lindgren
    OP
    Investor · Springfield, IL · Member since 2022 · 13 posts · 2 votes
    2y
    Quote from @Jim Reynante:

    Here's are a few things to consider when participating in a sheriffs sale/auction for real estate:

    Tax Trouble: When someone doesn't pay their property taxes for a while, the local government can put a lien on the property, which is like a claim to the property.

    Public Auction: The Sheriff's sale is like a public sale where anyone can try to buy these properties. They usually happen in a public place like the county courthouse.

    Minimum Price: The starting price for these properties is the total amount of unpaid property taxes, penalties, interest, and other costs. This is called the minimum bid.

    Bidding War: People who want the property bid on it, and the one who offers the most money wins. It can get competitive. In your scenario that you describes, there was no other bidders... which is a huge plus for you!

    Owner: If you win the auction and pay the highest bid, you get a legal document called a Sheriff's deed. This means you now own the property, but there might still be other debts on it.

    Redemption: In some counties, the old property owner has a little time after the sale to pay what they owe and get their property back. If they do, you get your money back plus some extra (e.g., interest, penalty fees). Please keep this in mind, do not make any upgrades on the property until AFTER the redemption period expiration. For example, let's say the redemption period for a property you won at auction is 6 months. Now during the 5th month, you decided to put a new roof on the property. Then, the original owner redeems the property after 5 month and 28 days have passed. The original owner get the property back, you get your original purchase price amount back plus the interest and penalties that were collected. But what about the $20k you spent for the roof? Unfortunately, that is a sunk cost and you lose out.

    Risks and Homework: These auctions can be tricky, so you need to research the property to know if it's a good buy. Look into the property's condition, its history, and any other problems.

    Rules and Laws: The rules for these sales can be different depending on where you are. Make sure you follow the rules and get legal advice if you need it.

    So, Sheriff's sales can be a way to buy properties at lower prices, but you have to do your homework and be aware of the rules and risks. It's a bit like a competitive auction for houses with tax problems.


     Excellent breakdown. I really appreciate the help.

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