Purchasing at the sheriffs sale

15 Replies

Hi everyone
Ok got a question for those of you who have purchased foreclosures. What process do you use before you go to the sheriffs sale and bid on a property. This is what I do Is there anything else I should be doing Like Title searches and so on If so how do you do it with out it costing the fee for a title search.
I Usually get my list each week go through and run prices for the area Im looking at. I find the propeties that would make sence for me to purchase.
Next I go and visit the property take pictures make notes on it . Then I go back and evaluate my notes and pictures.
And finally I,m off to the sale.
Is there anything I,m Missing. Thank you for your help.

Hi. A great start. The nexts step would be to find any leins and encumberancies on the property. A title search can do this but cost a 100 to 500. So doing this on ten properties only half going on auction the one that do might not meet your criteria because of the new information from the title searches. You may want to consider learning how to do the title search yourself. after all this information is stored in the public record at the county court house. I took a course for 160 dollars I do not want to recommend it just yet. but go to the recorder of deeds office. Match up any liens or encumberance related to that property. Do not look at everything for the last 50 years, just as far back as the last time the deed changed hands, because the bank most likely loan money on a clean title. So any liens in the current mortgage holders name is what your concerned with. I hope this helps. Please write back about your experince please to help my self and other

ok but my next question is when I get the list of foreclosures It lists the encumbrances next to the property do I still need to go to the courthouse and do the search and also when it goes to sale dont they already add all the encumbrances so you get a clear title when its purchased ? If it matters Im in Illinois. thanks everyone

Anyone else have any ideas on this question ? please help

Originally posted by "mudtruck":
dont they already add all the encumbrances so you get a clear title when its purchased

I don't think that's always the case. I've heard stories from seasoned investors here in Tennessee of naive bidders buying themselves a third mortgage at the courthouse, thinking they were getting an unencumbered house. What can or cannot happen is sure to vary by state.

Also, imagine there's an IRS lien on the property. Foreclosure laws are under state control. The IRS operates under federal law. What happens when a bank wants to foreclose but there's also an IRS lien? I don't believe the IRS is going to let state law dictate how it can or cannot collect on its lien. In any case, it's a major issue that you better understand very well before you start bidding I'd look for an authoritative answer from someone familiar with your own state's law.

Okay this is how it goes. You have the list of foreclosures. You find properties with lots of equity. Then find out what else is an encumbrance on the property. What is being auctioned off takes care of that lenders debt, no one else’s except if it a first mortgage, the second and third lose their equity in the property. Also you will have to pay taxes. there are a few exceptions. So if you see a tax lien on the property 9 out of 10 your paying that one when you get the property. So first check to see which place the mortgage is in. The first mortgage is the oldest. Then check taxes and mechanics liens. Once the property is yours from the bidding. Get insurance. Then start the eviction process. Its 3month for the stupid tenets 6 month for the smart ones. Oh if you can have the water turned off, that gets them out quick. Its not always possible in every state. That’s is good luck.

I always check for liens on foreclosures at the county clerk's office. I do this for all liens if I am buying it pre-foreclosure and for tax liens if I am buying at the foreclosure. If the foreclosing lender gives proper notification to the IRS (I think it has to be 90 days before the foreclosure), then the IRS tax lien will fall off but the IRS has 180 days to redeem it from you (buy it back from you). I don't deal with state tax liens much here in Texas (there's no state income tax) so I am not sure the procedures for them. I always just factor them in the price if I do see them. I also factor in paying the county property taxes (ad valorem taxes) for the current and the last year.

You absolutely can buy a second or third lien. Any lien holder can foreclose so I would do my research and make sure you are looking at the first lien. Any non-tax liens recorded after the foreclosing lien will fall off (i.e. mechanics liens, second liens, etc.), but any non-released liens filed before the foreclosing lien will stay on the title. The foreclosing lien holder gives no guarantee of title at foreclosure. That's why you need to research the public records.

That's very informative, Mr. Webber, thanks.

Originally posted by "Ryan Webber":
but any non-released liens filed before the foreclosing lien will stay on the title.

What happens when a second or third lien forecloses but nobody bids? Does that bank (or whatever) take title and responsibility for the prior liens? Also, what do banks do about unpaid taxes (especially property taxes) if they end up taking title, even from a first lien? Do they just have to eat them?

A second lien that forecloses takes the legal rights of possession from whoever owns the property but the second lienholder's position is still subject to the first lien. The first lienholder can legally foreclose on their lien at that point under the due-on-sale clause, because title was transferred.

Yes, the bank eats the property taxes.

Correction on IRS redemption time frame - the IRS has 120 days to redeem after the foreclosure sale. Mudtruck - Ryan and Foleno are giving you good advice. Let me be more blunt. If you run down to foreclosure auctions based on the information in your "list" you are destined for a very expensive lesson. You need to understand every nuance of the foreclosure process and must be able to research title yourself. When you bid at sale you need to know with absolute certainty what liens are on the property and their priority.

It is 120 days. Sorry about that.

Are there any ways to research titles on the internet Instead of going to the court house or wherever how do any investors out there do title searches for foreclosures your going to bid on?

Many public records offices are online. If not then you will need to go to the county clerk's office or get a title company to run a title search.

<<<<<Hi everyone
Ok got a question for those of you who have purchased foreclosures. What process do you use before you go to the sheriffs sale and bid on a property. This is what I do Is there anything else I should be doing Like Title searches and so on If so how do you do it with out it costing the fee for a title search.
I Usually get my list each week go through and run prices for the area Im looking at. I find the propeties that would make sence for me to purchase.
Next I go and visit the property take pictures make notes on it . Then I go back and evaluate my notes and pictures.
And finally I,m off to the sale.
Is there anything I,m Missing. Thank you for your help.>>>>

Hi,

Here's a quote from one of my favorite books on tax deeds/sheriff sales:

1. Find comparable sales (you're doing this)
2. Make sure there's no encumbances for the lot
3. No environmental hazards (dept of health, zoning checks)
4. Make sure it isn't land locked
5. Make sure that there's no title problems (tax liens, etc.)

There's a bunch more but I'm tired of typing the checklist.

Anyone know what book that quote would be from?

Originally posted by Foleno:
... Match up any liens or encumberance related to that property. Do not look at everything for the last 50 years, just as far back as the last time the deed changed hands, because the bank most likely loan money on a clean title. So any liens in the current mortgage holders name is what your concerned with. ...


Although the quoted statement above usually holds, there are times when you will find liens still in place that pre-date the most recent owner's deed. And those would be considered as recorded earlier, thus pushing the most recent owner's liens into more subordinate positions. I observed a property go to sheriff sale in March 2008. As REO, it finally went under contract in March 2009 - but it had title issues and has yet to close. In Sept 2009, the lender finally filed lawsuit to "quiet title". The liens in question on this lawsuit pre-dated that most recent owner.

Another dilemma arises in situations where "equitable subrogation" comes into play. I will not explain this term; you can google for it to understand what it means; and it may or may not apply in your state. Situations like this aren't so common, but I would not be surprised to see more of them happening with the extent of the distress in today's market.

And then there are subordination agreements. These are rare indeed, but they do occur; when you have a subordination agreement, lien positions don't turn out to be in the chronological order in which things were recorded.

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