Buying Foreclosures in Pennsylvania

[George Lambrinos]

 I just moved from Allegheny County to the Allentown/Bethlehem area.

I've completed a number of successful flips through Allegheny's Sheriff Sale but they have all been Free and Clear Tax sales. Free and clears are harder to come by everywhere else in the state because you have to wait for yearly judicial sales (In Allegheny county they trickle in every month vs one big annual sale). I have a question about purchasing a foreclosure.

Example:

$200K home is getting foreclosed and there is $100K left on the mortgage in addition there are tax liens for $10K, I bid and win the house for $125K.

Does my $125K go towards paying off the previous mortgage and liens?

125K - 100K = 25K (Covers mortgage)

25K - 10K = 15K (Covers taxes)

15K left over. I know court costs and lawyers always have first position and get paid first so probably 2-3 thousand go to them making it really $12K. Where does the other $12K go? I've heard the previous owner but I am not sure.

Any thoughts?

Thanks,

-George

[Steve Babiak]

Maybd @David Krulac will also join in on this topic. 

The Tax Claim Bureau sales are what you are referring to. The judicial variants of the TCB sales are only free and clear when all lien holders have been properly notified of the impending sale in advance. 

Many of the TCB upset sale properties will have little or no mortgage, and since the mortgage is the biggie that is divested in a judicial sale, you might find some of the upset sale properties worth a look. 

Then there are the sheriff sales for unpaid municipal liens. These might have redemption rights post sheriff sale. Portnoff is the law firm that handles the bulk of these for the municipalities. The various municipal taxing authorities can opt out of having the TCB hold the sale for the delinquent payments, and hire the likes of Portnoff to handle the collection. Portnoff will announce when a judge has been petitioned to allow the property to be sold free and clear - so you might consider some of these also.