Home buyers are always looking for a bargain. But if you’re really looking to save some dough, consider a sheriff’s sale. As the name suggests, it’s a real estate sale that involves your local authorities. The homes included in these sales are in the foreclosure process, so the mortgage lenders use a sheriff’s sale as a way to recoup their losses.
For buyers, purchasing a foreclosure home might sound like the ultimate boon, but a sheriff’s sale isn’t as cut-and-dry as it might seem. Yes, you can often get a home for a fraction of the market price, but the stipulations and restrictions you must adhere to can back you into a corner if you’re not careful.
Here’s what you need to know about a sheriff’s sale.
What is a sheriff’s sale?
A sheriff’s sale is an auction held by local law enforcement in which it sells off properties that have been repossessed, according to Denise Supplee, operations director at SparkRental.
“When a home in foreclosure gets to the sheriff’s sale, it is at the end of a long foreclosure process. The owner will no longer be able to ‘make good’ on the mortgage that is in arrearage and keep the property,” Supplee says.
The auctions are open to the public and occur when the mortgage lender looks to foreclose on the lien—or legal notice attached to the property title because of an unpaid debt.
What types of properties are part of a sheriff’s sale?
Properties that end up in a sheriff’s sale range from condos to duplexes to single-family homes. But most share one characteristic—they are often in need of some TLC.
“More often than not, a property that ends up on the sheriff’s sale list will be one that has a problem or two or more,” Supplee says.
Paying for a home at auction
Buying a home purchased at auction is much different from a traditional sale. You’ll likely need to put down a money order or certified check for a percentage of the property price, according to Supplee. Of course, this too will vary depending on where you live.
“Check with the specific county office, as they all have different requirements. For example, personal checks are rarely permitted,” Supplee says.
In addition, it’s important to check to see if the property has any outstanding liens (other than the mortgage lien) before you bid on the home. Why? You may have to bring your own cash to clear the lien or liens, or risk walking away from the deal.
From there, the successful bidder will have 30 days to close on the property, which will include ordering a title search. This quick time frame might not be enough time to obtain a mortgage, though, so if you do need a loan to afford the home, make sure to get pre-qualified and line up a mortgage broker to work with.
If the successful bidder fails to come up with the rest of the purchase price within the 30-day period, the deposit made on the property will be forfeited, says Richard Klass, an attorney in Brooklyn, NY. In that situation, the second-highest bidder will be given the chance to purchase the property.
Should you consider a sheriff’s sale?
On the surface, a sheriff’s sale might look like a terrific bargain, but certain factors can make the process complicated—and way more expensive than you imagined.
In most cases, homes at auction must be purchased sight unseen, so there is a risk involved. As Supplee explains, the homes that reach auction have been foreclosed upon and might have been unoccupied for some time. They will be in various states of disrepair and could need serious (read: expensive) renovations like a new foundation or roof.
“Can you get a good buy? Absolutely,” Supplee says. “However, it may be wise to get a mentor or go to a few auctions just to watch and learn first.”
Because of the likely expense and extent of needed repairs, Supplee does not recommend that a first-time home buyer purchase a property at auction. Even if the bid is successful, the risk is high that a first-time home buyer will not be able to fund the purchase of a sale, and would end up having to forfeit the deposit.
Finding sheriff’s sales near you
Sheriff’s sales are organized and advertised differently depending on where you live and which municipality is in charge of handling the sales. To find out about a sale near you, reach out to your local law enforcement agency for the next sale date.
“Advertisements of auctions are published in newspapers of general circulation,” Klass says.
The sales are usually advertised frequently, so if you don’t see any properties that pique your interest one month, keep scouting.
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