What is "The Courthouse Steps"??

9 Replies

Greetings All, I'm a novice here trying to tap this fountain of knowledge so thanks for indulging. When studying up on REO, (pre) Foreclosures, notes, etc, I keep seeing the phrase "...on the Courthouse Steps." Can some elaborate or provide guidance on this. Is it proverbial, metaphorical, or can I literally go to my local Courthouse with a checkbook and have my cake and eat it too? Thank you, Adam

Throughout America there are constant foreclosure auctions held in front of most courthouses at a given time. They each have there own rules on bidding and methods of payments and time deadlines to pay. You will find professional bidders who make there living buying potentially a dozen homes every day using investor cash or established lines of credit. It is hard to compete against them but can be done for enough cash. You will find that the best bargains are always finding these homes before the homeowners lose them to foreclosure and they hit the public auction.

I don't think these auctions actually occur on the courthouse steps any more.  Around here they're in a room at the courthouse.  But, yes, you can go to that room, register to bid, and if you win, buy a house.  Certified checks are generally required, so folks bring a stack of those for various amounts. You get any overpayment back, though not on the spot.

Now, what you get varies widely from state to state.  Its usually some sort of certificate that has a timeline for actually getting the property.  Here junior liens have the ability to pay you your winning bid and take the property.  In some states, the previous owner can do that.  Some states allow "upsets" where someone can bid higher after the auction.

You usually get the property "subject to" any senior liens. This really bites newbies. A common bad situation is for an HOA to foreclose. HOAs liens are usually junior to any mortgage or other encumbrances. (Here, up to six months of HOA dues are made senior to other encumbrances.) Someone wins an HOA foreclosure for a few grand or $10 grand and thinks they stole the place. Then they discover one or more senior mortgages that total more than the property is worth. Oops, you're screwed. You bought nothing and you won't get your money back.

You also do not get to see the property or do any inspections, unless you can talk your way in.   Guess how open the owner or tenant is going to be to letting you have a look?  So, if there's some issue with the property, its your issue. 

So you really must understand how the process works in your state.  And you must understand how title works in your state.   And you must be able to thoroughly analyze the title situation before bidding.

Thank you Brandon. That's what I was looking for. You mentioned finding pre-foreclosures as the best bargain. Aside from knocking on doors and asking how their mortgage payments are going, would credit unions be a viable source to cold call or show up in person and asking about non-performing borrowers or people needing "help"?

Originally posted by @Jon Holdman :

I don't think these auctions actually occur on the courthouse steps any more.  Around here they're in a room at the courthouse.  But, yes, you can go to that room, register to bid, and if you win, buy a house.  Certified checks are generally required, so folks bring a stack of those for various amounts. You get any overpayment back, though not on the spot.

Now, what you get varies widely from state to state.  Its usually some sort of certificate that has a timeline for actually getting the property.  Here junior liens have the ability to pay you your winning bid and take the property.  In some states, the previous owner can do that.  Some states allow "upsets" where someone can bid higher after the auction.

You usually get the property "subject to" any senior liens. This really bites newbies. A common bad situation is for an HOA to foreclose. HOAs liens are usually junior to any mortgage or other encumbrances. (Here, up to six months of HOA dues are made senior to other encumbrances.) Someone wins an HOA foreclosure for a few grand or $10 grand and thinks they stole the place. Then they discover one or more senior mortgages that total more than the property is worth. Oops, you're screwed. You bought nothing and you won't get your money back.

You also do not get to see the property or do any inspections, unless you can talk your way in.   Guess how open the owner or tenant is going to be to letting you have a look?  So, if there's some issue with the property, its your issue. 

So you really must understand how the process works in your state.  And you must understand how title works in your state.   And you must be able to thoroughly analyze the title situation before bidding.

Courthouse steps auctions still exist around here. Show up with your deposit in hand to register and bid right outside the circuit court doors. 

Actually banks and credit unions will never tell you a word about properties about to be foreclosed on,it’s a matter of legal privacy. That’s the investor game in a nutshell.Who can find the distressed properties first and get to the homeowners before they are tossed out onto the street at 6am. You advertise,you knock on doors,you make cold calls by phone,anything to get their attention when the world is about to crush them. 

Originally posted by @Brandon Battle :

Actually banks and credit unions will never tell you a word about properties about to be foreclosed on,it’s a matter of legal privacy. That’s the investor game in a nutshell.Who can find the distressed properties first and get to the homeowners before they are tossed out onto the street at 6am. You advertise,you knock on doors,you make cold calls by phone,anything to get their attention when the world is about to crush them. 

 Well...they kind of do. They publish the debt amount in the paper for the entire world to see and tell you when the sale is, where the sale is and how much potentially the sale will be for. So, it's not about finding them really as everyone has the same access to the same information, big or small time investor. Once the auction happens, they aren't being tossed out at 6:00AM. I'm sure you were just speaking proverbially on that but just in case not...

You probably want to be careful about advertising too unless its one of those generic "I buy homes for cash" signs on the telephone pole. Especially in California where you are going to more than likely be accused of engaging in foreclosure consulting, which would require registration and licensure in all but a few very specific exceptions.

Originally posted by @Brandon Battle :

Actually banks and credit unions will never tell you a word about properties about to be foreclosed on,it’s a matter of legal privacy. That’s the investor game in a nutshell.Who can find the distressed properties first and get to the homeowners before they are tossed out onto the street at 6am. You advertise,you knock on doors,you make cold calls by phone,anything to get their attention when the world is about to crush them. 

Here in CO its not the foreclosing lender but the "public trustee" that publishes this info. Its also in public records. Again, the details vary widely from state to state. Here in CO, the first step is for the lender to file a "notice of election and demand" or NED. In most state this is called a NOD (notice of demand) or a lis pendens. Regardless of what the document is called, its a public document. You can get that data from the county or some third party serviced that collects it from the county. If the property stays in the system, it eventually gets a sale date. Here those are on Thursdays except Denver county which is Wednesdays (may have that flipped around. The public trustee publishes a list on Tuesday (or Monday for Denver) afternoon of the properties in the upcoming sale. So you have about a 40 hour window to really pursue the property. Maybe knock on a door. Do a title search. Then, at the sale, some of these will be pulled at the start. The rest of them get auctioned. Some counties stop the sale when there's a winner and the winner hands over the money. If not, the sale of that property resumes. Other counties you go to the back of the room and settle up. Still others give you a few hours to get to the bank and get a check. There used to be an owner redemption period, but some years back that part of the timeline was moved between the NED filing and the sale. Junior lienholders do have a short time (about a week) when they can redeem. You get a certificate at the sale and, assuming nothing intervenes, you'll get a "special warranty deed" once all the redemption periods expire.

Again, this is only the CO process.  Every state, and as you can see, even counties have different processes.  The opening bid is in the info published two days ahead of the sale.  Sometimes that's the full amount the lender is owed, sometimes its much less.

They still actually do "the courthouse steps" where I live. I've been to a couple of them. One of them was in the dead of winter (January) this past winter, and everyone stands outside and freezes to death. They take the meaning literally here.