Buying from Sheriff sales
My partner and I are looking to scale our business and look at buying some deals from sheriff sales in our areas. We are trying to line all our ducks in a row and make sure that we aren't missing something when it comes to purchasing properties from these auctions. Is there anything we should be aware of when we are buying these properties other then the fact the inside might be destroyed? Are there any other things we are liable for paying if we have the winning bid?
Thank you for those that help!
#1 All Forums Contributor
- Investor
- Virginia
@Austin Ralls
You didn’t mention where you are buying, but you need to know what you are buying. Google auction buyer buys strip of land.
Also what is being foreclosed on, a first lien, 2nd lien, HOA lien? There is a lot to be done prior to going to the sale to make sure you understand the sale.
Also at sale you will give a deposit and if you do not close within specified time you will lose your deposit. Typically deposits are hefty amounts.
I buy from Sheriff sales. Research before hand as much as you can as far as where you are wanting to go with this property (rental? Flip?) I only put 10% down on sale date and have never lost my money. Reach out if you have any questions. Good luck
@Austin Ralls --I would imagine that with sheriff sales, you'll encounter a lot of properties with meth contamination. If this is a road you want to go down, you'll need to become familiar with meth testing, meth levels, and what the laws are regarding renting and selling properties that have various levels of meth contamination. You'll also need to educate yourself on the costs of meth remediation (I think it's pretty expensive), and factor "worst case scenario" remediation costs into your financial models. You'll also want to check out whether the sherriff's department can give you any info about whether the property is contaminated before you buy...
At a broader level, I'm guessing that sheriff sale properties often have dodgy histories, and might be in bad neighborhoods (e.g.; was the property used as a trap house? was there a murder committed in the property? were any neighbors involved in illegal activity at the property before it was seized, and if so, are those neighbors still living nearby? what are the crime rates in the neighborhood?) ...these are the types of questions you'll need to get very good at asking (and finding answers to) if you want to be successful with buying sheriff sale properties.
Good luck out there!
@Austin Ralls --I should note that in my experience, meth contamination is surprisingly common--even for MLS listed B-class properties in decent neighborhoods. A fairly significant percentage of the properties I've had tested come back positive for meth contamination, and I would assume that it's even more common for sheriff sale properties.
I've bought hundreds of houses at trustee's sales (Arizona) and at sheriff's sales (Wisconsin). The single most important thing you MUST do is get a title report prior to the auction (sometimes referred to as a preliminary title report, letter report or owner report).
The title report will reveal what lien position the foreclosing lender is in, as well as if there are any other "skeletons" in the closet of the home (i.e. federal or state tax liens). It will also tell you if there are any unpaid property taxes (yes you will have to pay those if you're the winning bidder).
I guess I've been fortunate over the years, but none of the houses I've bought have had any meth contamination. Most of the time the homeowner is simply down on their luck from a job loss, divorce or medical issues and can't afford to pay the mortgage. Good luck Austin!
Quote from @Marty Boardman:Is there something special included in these reports that is not public information? Is this gotten from the county or an outside party?
sheriff's sales (Wisconsin). The single most important thing you MUST do is get a title report
I looked at Milwaukee, and one has to pay about $7 via Tapestry. Certain other counties seem to have this information freely available.
You get a title report from a title company. I use Land Closing Services in Wauwatosa. You want to get an owner's report. This will list, in chronological order, all liens and judgments recorded against the property. Some of this info is public, but can be very difficult to find. I believe Land Closing charges $25 for these reports. Well worth the price! Good luck!
I read your reply, and you seem pretty knowledgeable about sheriff sales, so quick question. Let's say it is the HOA that's foreclosing are you still
responsible for the mortgage on the property?
Quote from @Sho Thomas:
I read your reply, and you seem pretty knowledgeable about sheriff sales, so quick question. Let's say it is the HOA that's foreclosing are you still
responsible for the mortgage on the property?
Yes, the HOA is in second lien position so the underlying first mortgage would have to be dealt with after the auction.
@Marty Boardman Hi Marty, would you happen to have an online source you could recommend for title searches?
Netronline.com will let anyone find out what information is available thru county offices nationally. Not all counties are available. Some charge a fee. It may be good to see who the lender is before the sale. Maybe, the note could be purchased. There are also newspapers that publish upcoming sales. Their subscriptions can sometimes be expensive.Sometimes if you know who the trustees are they publish sales on their website. Or list the status of upcoming properties. If the note can be purchased you can also ask to see the credit bureau. Possibly even the notes of what has brought the homeowner to foreclosure. It's good to know the parameters. Sometimes homeowners are forced into bankruptcy. So it's good to find out about such things via Pacer.
Quote from @Miranda Poteet:
@Marty Boardman Hi Marty, would you happen to have an online source you could recommend for title searches?
Your most reliable source for a title report is a title company in your area. I've vetted a few nationwide online title search companies, but they are slow and expensive.