Title Search for Sheriff Sale

25 Replies

I just got a title search for a house I am interested in at our next sherrif's sale. The house has a second mortgage. I heard that is not a problem. What exactly am I looking for in these title searches? Novice question.

Hi - You want to make sure that any or loan or encumberance that shows up has a corresponding release, except for the one that is foreclosing and sending them to the sheriff sale in the first place.

Make sure that it is NOT the second mortgage that is foreclosing. If it is, then you will be buying yourself the first mortgage. The first can wipe out the second, but the second can never wipe out the first since it is in a junior position so be careful. I have seen this happen to people.

Check back taxes too and make sure that there are no taxes that have been sold for previous years. It's happened to folks where they bought the house at sheriff sale and prior to the confirmation hearing someone had bought taxes years ago, their waiting period was up, and the tax buyer swooped in and claimed the property right out from under the person that bought it at sheriff sale. Nothing you can do about that either, so be sure to check!!!

Good luck!

sherrif's sale+ Novice=bad idea.

No disrespect intended. Flip a dozen homes before you even consider doing courthouse steps stuff. It's the people that think they know whats going on that take the biggest losses there.

Originally posted by Ann Contorno:
...

Check back taxes too and make sure that there are no taxes that have been sold for previous years. It's happened to folks where they bought the house at sheriff sale and prior to the confirmation hearing someone had bought taxes years ago, their waiting period was up, and the tax buyer swooped in and claimed the property right out from under the person that bought it at sheriff sale. ...

This point is not an issue in PA, since PA is a tax deed state; whoever bought at the tax sale ended up getting a deed.

Now, you still do want to see if the house has any tax liens, because it will be sold at the tax sale to satisfy the tax liens.

Now, you will want to see if the second mortgage is also in foreclosure; the county prothonotary in PA is the place to check that. If second is in foreclosure, then you can check the case docket to see how much the second is looking to collect. "Why is that?" you ask. Because the second will probably show up to bid, and they will bid high enough to collect what they are owed usually; meaning the second will bid up to the total of whatever the first wanted plus whatever the second is owed. You just want to be aware that the second can readily outbid you due to their "protecting collateral at risk". If the second isn't in foreclosure (very rare if the first is foreclosing), then they will still be potential bidders against you; you just will have a harder time figuring out how high they will be bidding.

If there is any IRS lien, then you will have to wait out the 120 day redemption period that the IRS gets, if you win the bid.

A lot of this can be found in the link collection here:
http://www.biggerpockets.com/forums/41/topics/68977-foreclosure-auction-sheriff-sale-and-trustee-sale-faq

As a novice, you should spend some time reading through all of those until you understand all of the issues you see there - because there might be challenges beyond the ones there that you can end up facing.

Thanks for the information everyone. Yes, I consider myself a novice but I have been learning for 5+ years and I have had one successful flip. I'm also taking the 3-day "FortuneBuilders" class in Nov. I'm hoping to find more ways to find good deals but right now I am focusing on these foreclosures. I've been to several and unlike what I am hearing from other cities, not many people bid on these auctions because they are intimidated by the process or they aren't sure. That's why I am trying to learn. Your answers have been extremely helpful and thanks for the link, Steve!

Originally posted by Mariana Skonieczka:
... I've been to several and unlike what I am hearing from other cities, not many people bid on these auctions because they are intimidated by the process or they aren't sure. ...

You're missing the most obvious reason - the banks are asking too high of a price at the sheriff sale for most of the properties that go to bid.

It doesn't seem to have anything to do with certain cities or areas. It has more to do with how banks conduct business IMO. On occasion a bank attorney will make some bid that is not normal; I will ask the attorney what that specific bid was all about and will get an explanation that this is what the bank instructed him to do.

I do notice that the bank's bid at sheriff sale for houses in less desirable areas do tend to be less - sometimes / oftentimes less than the published debt that was owed.

Banks appear to get a BPO before setting the opening bid. It is almost always too high. Recontrust publishes the bid price on their web site prior to auction. There are some big operators who buy 3-8 year old homes at what appears to be 20-5% below market, but I need a bigger discount to be safe.

You can buy at foreclosure sales, you just can't pick your assets ahead of time. I think i did a few dozen over the years, maybe average was 1 a month? At that time, maybe 5-10 a month were selling out of the 500-1000 properties. My typical thought was 1% of homes sold at the sale. You end up researching 100 homes to maybe buy 1.

I went for a number of years, did this flip for a client.
http://216.255.243.135/DEFAULT.aspx?Key=835226&YR=2012

75k in, 140k out. Cash sale closed in 14 days. We did nothing to the home. I also think we priced it too low as it turns out, since we had multiple offers.

Deep margins happen at the sale because everyone is scared and typically they don't know everything about the homes they are buying. This particular asset we bought 100% blind. I honestly didn't even know it was on a paved road till one of the other investors told it to me during the bidding. I almost backed down from winning till he told me that. I only knew what the property appraiser was telling me. We gambled at a lot at the same with deposits.

I could get into all the different problems we faced, all the struggles we had to overcome. I'm not saying its not possible, i'm just saying it isn't worth the risk. I rarely go to my local county sale now. I must of made that choice for a reason.

Sherrif sales / auctions should be used as an add on to your business after you have properties being secured by other means first then add this into the mix...i would focus on direct mail post cards & letters to absentee owners, probate, out of state owners, sign advertising, I actually do mailings to homeowners located on high traffic routes within my city and offer to rent space in their front yard for a small fee to put a marketing sign on their front yard, it works great and give you more credibility over a bandit sign on a utility pole...I also am an acredited BBB member, this works incredible when a seller is on the fence, it promotes you as a trusted advisor, I have closed more deals because of it. Also use multiple web site squeeze pages...what i'm getting at is marketing is the key to your success, the properties will come...If you have $4,000 to go to one of Paul & Thans boot camps, then you have the money to market...And if you are taking your last 4,000 to go to a bootcamp, I would highly suggest spending it to build your business first, then add more education, just my 2 cents...

So you're saying if I'm going to these sales, have information and be ready to bid on more than one house?
Aaron, where do you have the best luck finding deals? or anyone else reading this?

Originally posted by Mariana Skonieczka:
So you're saying if I'm going to these sales, have information and be ready to bid on more than one house?
...

IMO the message should be that more properties at sheriff sale will be postponed or bought back by the bank than will end up being bought by investors. The sheriff sales in PA are held once a month in most counties, so there is only one day and one location to attend; I've read posts by other foreclosure auction buyers where they say they have multiple trustees and multiple locations to go to, and that it is more than one day a month as well.

If your sheriff's department is online, they might be good about updating the list so that you have a good idea of what properties won't go to sale (postponements for whatever reason); my county is like that, so I know which to skip over when conducting research.

But I think you get it - the more properties that you are prepared to make a bid on, the better your chances will be of getting one - if that is your goal. Sometimes your goal is just one specific property - I see it a lot where somebody will attend the sheriff sale, bid on one property, and leave after that property whether win or lose the bid. But you should set your goal for what works for you.

I have a little bit a related question that came up when I read Steve's posts.
You said the banks set the starting price? I thought it was the court?
When I see a property on MLS that had been foreclosed on and is listed by the bank, the sale history sometimes shows me a ridiculous last sale price. Say. property listed for $30k, about the market value, last sale at $75k 6 months ago, current owner is the bank.
Is the bank then bidding the large sum because technically they pay themselves, so the amount doesn't matter? And the higher the bid, the more losses they can claim or how do I have to understand this process?

I have no intention on bidding, but was always curious when I did my due diligence. Oh, and sorry for hijacking the topic... :)

In regards to UWE post, the banks do not dictate pricing, the proce is set after the bank gets 3 BPO's (Broker price opponions) fro three realestate agents, then determine a set price to start the sales process...the price will only drop when the property sits for a while and or get low bids supported by structual issues like foundation cracks, roof, heating system, copper removed...banks are not concerned with cosmetics such as ripped up carpets, paint or outdated properties... All pricing is set by a market analysis of the area and supplied to the banks by a licensed profesional. Hope that helps you....

Joe, I actually meant the pricing process before it goes into MLS. The 3 BPOs etc. I was familiar with. But at that point, I believe, the bank had the highest (or even only) bid at he court house and took possession. I can see the sale price at the auction in the sale history, and in those I see sometimes highly inflated prices, sometimes close to the last "real" sale during bubble times.

Originally posted by Uwe K.:
I have a little bit a related question that came up when I read Steve's posts.
You said the banks set the starting price? I thought it was the court?
When I see a property on MLS that had been foreclosed on and is listed by the bank, the sale history sometimes shows me a ridiculous last sale price. Say. property listed for $30k, about the market value, last sale at $75k 6 months ago, current owner is the bank.
Is the bank then bidding the large sum because technically they pay themselves, so the amount doesn't matter? And the higher the bid, the more losses they can claim or how do I have to understand this process?

Uwe are you able to see who was the owner who paid that higher price? Are you sure it's the bank that paid the $75k according the sale history?

Here our county tax board's site shows the same thing but I can clearly see that it was the foreclosed owner who paid that ridiculously high price, hence the foreclosure and sheriff sale.

In our county, banks start the bid at $100. Most newbies think the bank is allowing a property to be sold for only $100 bucks. But that's $100 over the upset amount (amount due the foreclosing party - usually the lender). Our county tax board will show $100 and the bank as the owner for the last sale on the property. And our county tax board online records are about 3-6 months behind real time. So perhaps you're not yet seeing the bank's $1 bid to take ownership of the property at auction.

Originally posted by Uwe K.:
... I believe, the bank had the highest (or even only) bid at he court house and took possession. I can see the sale price at the auction in the sale history, and in those I see sometimes highly inflated prices, sometimes close to the last "real" sale during bubble times.

This would be a case where the bank was trying to recover what they were "owed" by the defaulted borrower; the bank will tack on fees for special servicing, attorneys, costs to file foreclosure, interest for late payments, etc when they set their "bid" at the foreclosure auction (sheriff sale or trustee sale). The bank didn't have to pay themselves that much, that price simply reflects the accrual of what the borrower would have had to pay the bank. And the debt owed to the bank will often end up really close to the last sale amount as you've seen - and often the debt will even exceed the highest price paid at the peak of the bubble market.

Steve, the sherrif's sales are once a month and are online. They consistently update them so before you go to the sale you know which ones are cancelled and which ones are postponed. I usually like more than one house each month but the due diligence is costly meaning the title searches. Is there any way around this?
And Joe, my 3 day class was 200 bucks. I don't think I'm ready for the $4000 deal. But thanks for the information! :)

Originally posted by Mariana Skonieczka:
... I usually like more than one house each month but the due diligence is costly meaning the title searches. Is there any way around this?
...

Learn DIY title search :)

I have posted how that is done in PA in one of the links in the FAQ thread. See if you can come up with same results as the paid for search for the first few, since you are paying for those anyway you can use them to educate as well.

Hi Mariana-Paul & Thans weekend seminar is a prelude to sell their bbotcamps, I know because I have worked with them for years and have also attended several...I completly understand, money is tight, you can still promote your business on a shoe string budget and use gorllia marketing tactics.

I'm hoping I get some good information out of these three days. From what I've read there are only a few that go to the bootcamp (and they're interviewed and chosen). Well, I'll see soon, it's this weekend.

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