Pennsylvania Sheriff's Sale & Foreclosure Process

57 Replies

Since I struggled so mightily in finding information about the Pennsylvania foreclosure and sheriff's sale process, I wanted to create a thread going through the process in detail in hopes that this may help someone down the road.

First, I've been looking into a property that's on my street (I'll post some info on the analysis I did and update it with progress) for quite some time now as it sat vacant. Finally, a notice was posted on the window that it was going up for Sheriff's sale. Intrigued, I looked into it for weeks and eventually convinced my wife to bid on the property - which we won. However, there are numerous things I learned throughout the process that I'd like to share:

1) The sheriff's sale is the legal process through which the bank (or foreclosing/selling entity - i.e. tax authority, lender, HOA) is able to regain title to the home. So, in many cases, when you go to the sheriff's sale, you're actually going to be bidding against some form of bank representation. Something I found during this process was that if you do your homework, you can determine the attorney that is representing the bank and who will be at the sale. In this instance, I actually convinced the attorney to tell me the bank's highest bid price so we knew exactly how to bid.

2) The bank will, in some cases, win the auction and then proceed to make any repairs on the home and list the property for sale. This is when the home becomes "REO" and is listed on the multi-list as a bank foreclosure. So, in this case, we were able to cut the bank out of the middle time period. There are, I'm sure, a ton of factors which will determine how much the bank will bid. In this instance, the home was FHA, so the bank (again, I'm assuming) didn't have much incentive to actually bid up the price because they're going to paid back through mortgage insurance.

3) The sheriff's sale was held in the hallway - yes, the hallway, of the courthouse. In some instances, it's held on the steps out front.

4) The bid is completely like a auction. It starts at one price and is literally auctioned off to the highest bidder - I don't know why but I thought it was more formal.

5) In PA, you must be 10% of the purchase price down immediately, that day. You only need your driver's license and a check. The additional 90% is due within 20 days of the auction. This gives you time to get funds in order and complete any other necessary items. For us, this means finalizing our business set up, business account, and aligning money.

6) I do think we made a mistake though. We did not do a formal legal title search before the sale. While this is a very low priced home so we don't have too much of a deposit at risk, I do think we should have completed the search before the sale. However, based on the current information that I know about the previous owner and all of the online research I was able to do, we should have a clean title.

All told, this was, at very worst a great learning experience, and at best it's a great deal and should make for a great flip.

What experiences do you have with Sheriff's sales? How does the process work in your state? Any advice on getting the title search/other work done before the actual sale?

@James Triano

Thanks for the info. I, sadly, have nothing to offer on the topic but appreciate the info as we are interested in pursuing these types of properties in PA as well.  We are just in the learning phase of it all. Looking forward to what others may have to say. 

@James Triano

Thanks for sharing, I have never won a bid at a Sheriff Sale in Philadelphia, though I have attended a few.

There are two different types of Sheriff sales auctions in Philadelphia:

1-Tax Lien/Tax Delinquent

2-Mortgage Foreclosure

Below is a link going into more detail about the two:

http://www.phillyliving.com/blog/an-intro-to-sheri...

I have been to the Tax Lien auctions a few times. Most of these homes are in bad shape and would require total renovation.

Though I was not successful at these auctions before, I will be trying again this year

Thanks for getting this conversation started and good luck to you

A few questions and comments:

1) Is the sale a bank REO or a tax sale? You need to look at the deed specifically.

2) Did the Sherriff serve the original owner properly? The Sherriff's office in Philly is notorious for doing a bad job of serving the owners. That may give the original owner a right of redemption period.

3) In the case of a tax sale, the right of redemption period is 6 months after the sale. If they were not served, the right of redemption period extends to 21 years. There is no right of redemption on vacant land.

4) There may be other liens on the property. Some may get wiped out. Yes, you need to do your title work. If some of the liens are utilities, you may be able to negotiate them. I've been successful in getting a 50% discount in the past. 

5) Title insurance can be difficult to get on Sherriff Sale properties. Some title companies will only insure after a 12 month "waiting period". Without title insurance, no bank will loan funds.

Feel free to contact me if you have further questions. I routinely buy properties from the Sherriff sale, and yes, it can be complex. Hope that helps.

Thanks for sharing your experience. We've got our eye on a property that is supposedly going up for sheriffs auction soon, and I've been reading up on it in the meantime. I usually work with a real estate agent, and he's offered to come with me just to make sure I don't end up doing something stupid, but it's still an intimidating process.

FYI - Please be aware that each county in PA handles Sheriff Sales differently and you must understand the rules and regulations before bidding and winning a property. 

Most information can be found on the county's website - be cognitive of auction criteria such as type of  funds (for example Philadelphia county does not accept cash or personal check), amount of down payment, and when the balance must be paid in full. 

I'll echo what @Zachary Paul mentioned. Each and every county has different procedures. Some counties allow for the mortgage holder to announce their max bid. Others will not (and slow the process down). Once you're savvy, you can pull your own title search. Last I checked, they don't offer degrees in title searches, so it's not rocket science ;)

@Mark Gallagher   Mark you going to offend title examiners and title abstractors all across the US with that comment about rocket science... LOL...

@Mark Gallagher Mark if doing your own title search, how difficult is it to buy title insurance on your own?

Thanks @James Triano for the educational post.  i was long under the impression when the bank foreclosed, that they actually just took the property back since there was a mortgage on it. i didn't realize that they need to actually buy it at the sheriffs sale.  So if the bank is the winning bidder, where does that money go to? i think i am still a little confused on this subject.  thanks

@Ryan Cameron

That seems to be the case here as well.  This particular property that we're after is from a foreclosure auction which is certainly different from a tax sale.  I know that there may be other requirements for the tax sale (right of redemption period).  Good luck on your search!

Originally posted by @Victor Menasce :

A few questions and comments:

1) Is the sale a bank REO or a tax sale? You need to look at the deed specifically.

2) Did the Sherriff serve the original owner properly? The Sherriff's office in Philly is notorious for doing a bad job of serving the owners. That may give the original owner a right of redemption period.

3) In the case of a tax sale, the right of redemption period is 6 months after the sale. If they were not served, the right of redemption period extends to 21 years. There is no right of redemption on vacant land.

4) There may be other liens on the property. Some may get wiped out. Yes, you need to do your title work. If some of the liens are utilities, you may be able to negotiate them. I've been successful in getting a 50% discount in the past. 

5) Title insurance can be difficult to get on Sherriff Sale properties. Some title companies will only insure after a 12 month "waiting period". Without title insurance, no bank will loan funds.

Feel free to contact me if you have further questions. I routinely buy properties from the Sherriff sale, and yes, it can be complex. Hope that helps.

I'm going to try to do my best here to answer these questions and ask you a few more.  Thanks for your post!

1) This was a bank REO sale and not a tax sale. The judgement that was being enforced was the Bank vs. Homeowner. How do you typically find this out? I saw this listed on the county website

2) It would appear that they've been served properly as I don't see any reason why this would not have occurred.  Again, how do you typically find that out?

3) Thanks for that info.  I'll make sure we understand that when going to bid on any property with a tax issue. Great stuff. 

4) Glad we're on the right track - so, do you typically get your title search done BEFORE or AFTER you've won the bid at sheriff's sale?

5) This will be interesting for us then.  I wasn't aware how difficult it may be to get title insurance.  I'll make sure to look into this.  Thanks again for your help!

@Kelly Maguire

Good luck with your property search!  We were definitely intimidated by the process but at the same time we're very eager to learn and get as much knowledge as we can under our belts.  If you're not growing, you're dying!  Thanks for the post!

Originally posted by @Zachary Paul :

FYI - Please be aware that each county in PA handles Sheriff Sales differently and you must understand the rules and regulations before bidding and winning a property. 

Most information can be found on the county's website - be cognitive of auction criteria such as type of  funds (for example Philadelphia county does not accept cash or personal check), amount of down payment, and when the balance must be paid in full. 

Thanks for that.  You're right, I should have prefaced my post with that.  I do know that things seem quite a bit different in Philadelphia than they do here in Western PA.  Thanks for pointing that out! 

@Mark Gallagher

Hey Mark - thanks for your post.  I've got a question about doing your own title search - how do you typically do this?  I've been able to track down a ton of documents online (I know this depends on your county) but it seems to work well.  I'm just curious as to which documents you're specifically going to look for and how this is done.  I don't think it's overly difficult, I would just think there's a LOT of liability if you do it wrong. Thanks again!

Originally posted by @Matt F. :

Thanks @James Triano for the educational post.  i was long under the impression when the bank foreclosed, that they actually just took the property back since there was a mortgage on it. i didn't realize that they need to actually buy it at the sheriffs sale.  So if the bank is the winning bidder, where does that money go to? i think i am still a little confused on this subject.  thanks

I was under your exact same impression! I thought that when the bank foreclosed, they could literally just start selling it as an REO. However, they actually have to force it to sheriff's sale, then actually buy the property and obtain the deed. This is done (according to my experience) because they need to get title back on the house - the owner technically still has the title and the bank is simply a lien holder. The money that the bank bids actually goes BACK to the bank (after paying any applicable sheriff's sale fees, attorney's fees, etc.) If anyone out there has any more insight that can help Matt and I out, please post. Thanks for your post Matt!

What I have seen is the bank always bids the amount owed so then every bid after that is money for the bank. If no one bids then the bank wins the property and zeros out the account to sell the property as an REO.

Originally posted by @Matt F. :

Thanks @James Triano for the educational post.  i was long under the impression when the bank foreclosed, that they actually just took the property back since there was a mortgage on it. i didn't realize that they need to actually buy it at the sheriffs sale.  So if the bank is the winning bidder, where does that money go to? i think i am still a little confused on this subject.  thanks

First the bank has to pay the sheriff the costs for holding the sheriff sale. If the bank was bidding an amount higher than the costs to conduct the sale, the sheriff receives a percentage of the bid called "poundage" (think of it as a sort of commission).

Then a junior lien will have to pay a transfer tax based on the percentage of the value that was secured by the more senior liens; transfer of the interest in the property secured by the mortgagee's mortgage is exempt from transfer taxes. 

Originally posted by @Chris Miles :

What I have seen is the bank always bids the amount owed so then every bid after that is money for the bank. If no one bids then the bank wins the property and zeros out the account to sell the property as an REO.

Then you haven't seen enough of these; in undesirable neighborhoods in the suburbs, the bank's maximum bid will frequently be below the debt that was owed. 

Originally posted by @James Triano :
Originally posted by @Zachary Paul:

FYI - Please be aware that each county in PA handles Sheriff Sales differently and you must understand the rules and regulations before bidding and winning a property. 

Most information can be found on the county's website - be cognitive of auction criteria such as type of  funds (for example Philadelphia county does not accept cash or personal check), amount of down payment, and when the balance must be paid in full. 

Thanks for that.  You're right, I should have prefaced my post with that.  I do know that things seem quite a bit different in Philadelphia than they do here in Western PA.  Thanks for pointing that out! 

The state's statutes contain special sections for cities of the first class (Philadelphia) and cities of the second class (Pittsburgh). Please don't take offense to my post referring to Pittsburgh as second class - the actual language in the statutes uses that terminology (in case you ever look at the statutes).

So expect that those two cities will have some oddities in their rules that won't apply elsewhere. 

@James Triano  

@Matt F.

I have been to a few sheriff sales in my county.  Never bought anything there yet, but I am looking at buying some properties at tax sale soon.  

My experience has been that the bank hires a local attorney who shows up with a list of properties that he has been hired to buy.  When the sheriff offers them for sale he bids 'costs' on them.  Cost is just the fees that the sheriff charges to serve the papers.  If anyone tries to bid above 'costs' he then immediately bids what the banks max bid is.  I always assumed this is the current mortgage amount owed, but it may not be. If someone bids more than that he shuts up and they typically win the bid.  

I am curious as well how the sheriff can offer the property for sale (tax or sheriff sale) without serving proper notice.  That is the first time I have came across that concern.  I am even more curious as to how you know if they did of not?

I would also encourage others to make sure that they are developing their team!  My mentor gave me a name of a closing agency that he had done 30+ deals with (we are both buy and hold investors).  I have done a deal with them and they are FABULOUS!!! I still work a W2 job and I signed the closing papers on the street corner of my office building on my lunch break one time.  With the upcoming tax sale I called this closing agency to see what it would cost to run a title search on a few properties (I am looking at a property and my parents are looking at buying the neighbors).   Because of my relationship with him and my mentors past relationship with the closing agency, they offered to do the search and just tell us the results verbally without charging us a fee.  No insurance or anything, but the title work will have been done and done right.  

Hope this helps!  Would love to hear how others are fairing with these. My personal thoughts are that the risk is slightly higher (buying sight unseen, if you have to evict the current occupant they may trash the place, etc.), but if you do your homework (title search, etc.) you can get GREAT deals here.

Originally posted by @Victor Menasce :

A few questions and comments:

1) Is the sale a bank REO or a tax sale? You need to look at the deed specifically.

2) Did the Sherriff serve the original owner properly? The Sherriff's office in Philly is notorious for doing a bad job of serving the owners. That may give the original owner a right of redemption period.

3) In the case of a tax sale, the right of redemption period is 6 months after the sale. If they were not served, the right of redemption period extends to 21 years. There is no right of redemption on vacant land.

4) There may be other liens on the property. Some may get wiped out. Yes, you need to do your title work. If some of the liens are utilities, you may be able to negotiate them. I've been successful in getting a 50% discount in the past. 

5) Title insurance can be difficult to get on Sherriff Sale properties. Some title companies will only insure after a 12 month "waiting period". Without title insurance, no bank will loan funds.

Feel free to contact me if you have further questions. I routinely buy properties from the Sherriff sale, and yes, it can be complex. Hope that helps.

IMO the quoted post has a number of factual errors. 

Pennsylvania does not have ANY redemption period for MORTGAGE foreclosures after the sheriff has auctioned the property in a mortgage foreclosure. There is a time period during which a sheriff sale can be challenged in court, but that is not the same as a redemption. 

The redemption period on a Philadelphia tax sale is nine months from the date that the sheriff's deed is recorded. I have seen people post all sorts of different time periods for that here on BP - and all those other numbers would be wrong. The 21 year interval mentioned is the time period for "adverse possession" in Pennsylvania; failure to serve notice would result in this situation. And to qualify for a redemption period, certain other requirements must first be met; vacant land indeed will not have a redemption period as it does not meet the required criteria. 

Being able to get title insurance is a problem specific to tax sales IMO. And that is due to the redemption period. And the title companies use twelve months from the date of the sheriff sale as the wait period on these (incorrectly I must add as explained earlier); given that a sheriff's deed takes from six to twelve weeks to record, that is usually a safe number to use - until a former homeowner challenges the sheriff sale and the challenge lasts close to a year before the sheriff's deed is issued ... 

Originally posted by @Justin K. :

@James Triano  

@Matt F.

I have been to a few sheriff sales in my county.  Never bought anything there yet, but I am looking at buying some properties at tax sale soon.  

My experience has been that the bank hires a local attorney who shows up with a list of properties that he has been hired to buy.  When the sheriff offers them for sale he bids 'costs' on them.  Cost is just the fees that the sheriff charges to serve the papers.  If anyone tries to bid above 'costs' he then immediately bids what the banks max bid is.  I always assumed this is the current mortgage amount owed, but it may not be. If someone bids more than that he shuts up and they typically win the bid.  

I am curious as well how the sheriff can offer the property for sale (tax or sheriff sale) without serving proper notice.  That is the first time I have came across that concern.  I am even more curious as to how you know if they did of not?

I would also encourage others to make sure that they are developing their team!  My mentor gave me a name of a closing agency that he had done 30+ deals with (we are both buy and hold investors).  I have done a deal with them and they are FABULOUS!!! I still work a W2 job and I signed the closing papers on the street corner of my office building on my lunch break one time.  With the upcoming tax sale I called this closing agency to see what it would cost to run a title search on a few properties (I am looking at a property and my parents are looking at buying the neighbors).   Because of my relationship with him and my mentors past relationship with the closing agency, they offered to do the search and just tell us the results verbally without charging us a fee.  No insurance or anything, but the title work will have been done and done right.  

Hope this helps!  Would love to hear how others are fairing with these. My personal thoughts are that the risk is slightly higher (buying sight unseen, if you have to evict the current occupant they may trash the place, etc.), but if you do your homework (title search, etc.) you can get GREAT deals here.

@David Krulac  - maybe you can share some of the anecdotes you have regarding proper notice ...

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