What liabilities get transferred at a Sheriff Sale?

9 Replies

So Sheriff Sales... I'm getting more familiar with them but there are still some outstanding questions that I need answered before making any moves. I get that the upset price is the amount the price set by the plaintiff and court fees. If you pay that, you usually end up getting the place. The county office suggests that you do a title search. Aren't 2nd or 3rd position liens accounted for in the upset price? Is it possible to pay the upset price to suddenly find that there is a huge lien that now you are responsible for? I've read in various internet posts suggesting that a sheriff sale gives the property a "clean slate". Of course some liabilities are transferred such as judgement liens or HoA fees or water / sewage fees. The utility fees are usually minor. I'm concerned with a major liability. 

From what I understand outstanding tax liabilities (even with IRS and not just property tax) are another big ticket item that you have to be careful of.  Liens by 3rd party (contractors, etc.) are not of a concern!

3rd party liens are of concern - I bought one with 10k lien.  This issue arises when you try to sell it.  I am more interested in the research process.  Is there a way to research these?

@Kenny Reits two ways that can be used is checking the court filings for the foreclosure.  Every lien holder is served the foreclosure complaint.  Including judgment lien holders.  Another is to hire a title company to run a search.

@Curtis Eckhardt Like any purchase, it is important to do due diligence on sheriff sale properties.  Having a title agent you are comfortable with is extremely important.  One extremely important consideration is knowing the value of the area.  I have seen clients get outbid at sheriff sales because the value fo the bids were starting to meet or exceed the value of listed homes in the neighborhood.  Knowing the estimated amount of work you need to put in and the profit you would like to make will be important to know when to back away from the property.

You have to run title on all Sheriff Sale properties. We've come across plenty of properties that we were looking to pick up at auction just to find out there are other liens on the property, not just primary mortgage. Title searches cost you $75. Well worth the investment to make sure you don't inherit any additional expenses (irs lien, back taxes, etc). 

Where can I get a title search for $75?

Also, I've been a part of a bunch of foreclosures. it all depends on who the foreclosure suit names. If there is more than 1 mortgage and the foreclosure does not name the other mortgage(s), they are not cleaned by the sheriff's sale. Doing a title search is a great way not to get screwed. In most counties, they are very simple and can be done online relatively quickly. I do my own searches. 

Also, Taxes and other municipal liens are not cleaned by the sale. 

Amongst the many liabilities mentioned (superior liens, unserved parties, etc.) there is also potential environmental liability as well. Do your best to ascertain whether or not there is an oil tank, lead paint, asbestos, or other potential contaminants that can become personal liability even if the property is held in an LLC.