We have two OH NPNs and are looking into using a Private Selling Officer (PSO) instead of going the traditional route of Sheriff's Sale.
It appears that it's better, quicker, and will net us more if we use an online auction platform as opposed to doing a sheriff's sale. Does anyone have info or experiences that they are willing to share?
I purchase foreclosures in the Cincinnati-Dayton area both online and at the courthouse. I don't think it is any quicker going the PSO route vs courthouse. I feel the main factor determining quickness is the attorney handling the foreclosure for you.
I do believe the PSO sales generate a higher price. There where two identical houses in Huber Heights a few weeks ago. The sheriff sale one went for 91k and the PSO went for 96k. ARV was 135-140k and the sheriff sale one was in pretty good condition. I didn't look at the PSO house, because I felt that I had no chance of getting it for what I wanted.
Auction.com is the biggest PSO. Privatesellingofficer.com and ohioforeclosures.com both advertise the sale in the MLS but also charge a buyer's premium on top of the winning bid. Finally, some counties in Ohio (and all of them will eventually) have gone to an online format instead of the courthouse for the sheriff sale. The biggest issue with them is you have to wire of EFT them the deposit before the sale takes place which is kind of a pain.
@Adam Walter Thanks for providing the buyer's perspective!
As a lender, I would prefer to sell a property at foreclosure sale for $96k instead of $91k, if the selling costs were less than the $5k difference. I also like hearing you say that you avoid the PSO houses because it sounds like they attract too much demand. Sorry that it's bad for you, though!
My partner looked into using Auction.com but they are charging fees that are too high. We're looking for smaller outfits that aren't focusing on the megabanks.
@Andy Mirza If I were the lender, I would probably go the PSO route if the fees weren't too much higher. Most of the buyers at the sheriff sale are buying at the PSO sales. The PSO sales also includes many investors from out of state and even out of country. Also the sheriff sale can be intimidating for many people, and the sheriff will cut you off if you aren't aggressively bidding. I've won many properties over the years when the sheriff cut off someone wanting to bid but took a second too long. Each property takes no more than a few minutes to auction at the courthouse whereas I've seen properties at auction.com go 2 hours over the deadline at $100 increments every 2 minutes.
Over the past few weeks I had calls with a company that owns Williams and Williams auction and another one with those who own Hudson and Marshall.
Also https://foundationcref.com/properties/is another one besides auction.com and Hubzu.
Be happy to share those contacts.
@Chris Seveney Thanks! I'll message you if I need the contact info....
We ended up using PSOs for our first two NPNs that we bought in Ohio.
We tried two different PSOs and I felt like both did an excellent job in selling or trying to sell the properties. One of the properties sold at auction while the other reverted to us as REO. Those outcomes were due to our max credit bid requirements since we wanted more for the 2nd property, which was built in 2017 and we assumed correctly that it didn't need much rehab.
The PSOs held online auctions that were open for a week, with almost all of the bidding taking place in the last couple of hours before the auction ended.
Using a PSO requires a few additional steps with court filings that seemed to make the process take longer, although how much it added, I don't really know. I feel like the extra effort was worth it because I think selling with a PSO will get you higher bids compared to the sheriff's office, which doesn't have the same incentives. But then, maybe the buyer's premium (up to 5%) in the PSO auction suppresses the final bid.
One property was located in Stark County, the other in Franklin. Both courts seemed very slow to me and one didn't even do things online. Things seem to move so much faster when attorneys can digitally file their motions. Who wants to wait for the US mail? @Chris Seveney what do you think?
This is interesting - I have not done a PSO but what I have done is after taking a property back at auction I have listed it on auction.com and it sold fairly quickly. That would be another option for investors if it is faster to go through the sheriff auction.
I have 4 foreclosures ongoing in Ohio right now but for those the borrowers are deceased and we will not get them back - they will sell at auction so I will go with whatever is faster.
What is interesting is at last years annual property preservation conference sites like auction.com are working with counties to do sheriff auctions in person and live online so people could bid online or in person. I think that would be a game changer just like when online tax deed sales became available.
I will talk to my attorney about these to see what they say
@Chris Seveney That's an interesting point about not getting the property back.
I'm assuming that you're talking about loans with lots of equity where a 3rd party wins the foreclosure auction? For example, if your total collectible debt is $50k and the property is worth $150k, then you'll get a full payoff at auction and the property will go to the 3rd party bidder who wins at $120k.
In those situations, the sheriff's sale would probably be the fastest route. Going the PSO route takes some additional filings that add time.
With our second loan, total debt was $287k and the property was worth $320k. The bidding started at 2/3 of the sheriff's appraised value or $212k. We set our max credit bid to $287k because the house was built in 2017 and appeared to be vacant. We figured that if we took it back as REO, it would be a quick turnaround with a light rehab.
The online bidding made it to $265k so this is reverting to us as an REO. I believe that if this went to a sheriff's sale, the bid would have come in lower. The question is: which bid would have been higher given that the PSO sale had a 5% buyer's premium added to it? (The buyer would have to pay 5% to the PSO on top of their bid as the PSO's compensation.)
You could ask the same regarding auction.com. I went to several auction.com sales in 2011 and 2012 when I was buying condos at trustee sales. I bought maybe 2 condos near the beginning but stopped going because the bids went too high. They are very good at squeezing the most they can at those auctions. It's not like on the courthouse steps where if you pause for a few seconds you might lose the auction.
@Chris Seveney @Andy Mirza It is my understanding that eventually, all the sheriff sales in Ohio will be going to an online format. Several counties have signed up with Realauction.com (not sure if they are doing all counties). Here is the link for Butler County: https://butler.sheriffsaleauct...
I don't like this format because you have to have funds for the deposit amount to them before you can bid on the property. You can't just give a credit card number. Also, they don't advertise on the MLS, whereas some of the smaller and local PSOs do (Auction.com doesn't advertise on the MLS). I feel PSO's are the way to go to get the highest value at the sale.
@Adam Walter - I hope all sales everywhere go to an online format. I do not see an issue with the deposit funds as it does weed out a lot of investors.