What is a Sheriff’s Sale?

Are you looking to score an investment property for a low price… whether to “flip” it or simply because you love fixer-uppers? If so, one option you might consider is the Sheriff’s Sale, which is a little different than a foreclosure auction. A Sheriff’s Sale is generally a court ordered process with the purpose to satisfy legal pressure against the former owner of the property. A foreclosure auction is when a home is sold directly from the bank as a result of lack of payment on the property. At these events, you can often get properties for far below their full market value; while the condition of these homes can be variable, there’s no question that it’s a worthwhile option for real estate investors.

For those who have never heard of a Sheriff’s Sale before, buckle up; we’ve put together a crash course, offering everything you need to know on the subject.

Defining the Sheriff’s Sale

Let’s start with a basic definition.

A Sheriff’s Sale is a public auction traditionally held on the steps of a courthouse, and officiated by the sheriff or his deputies, giving the auction its name. The auctions are still officiated by law enforcement officers today. The sale of the home takes place because of a court order, and the money generally goes to several different entities that need justification such as lawyers and lenders. Without court authorization, foreclosure cannot take place on the home.  The auction is held with the public – giving anyone with the funds the opportunity to take over the home. 

These sales are all local, and typically they are conducted at the county level. They happen pretty often, and the best way to keep tabs on them is to stay in the loop with your county’s Sheriff’s department. Online Sheriff’s auctions are becoming more and more common as years go on. Be sure to get on a mailing list for your local Sheriff’s office if you’re looking to purchase soon! 

What Kinds of Homes Will You Find?

Buyers and investors may wonder: What kinds of property are sold at a Sheriff’s sale?

The short answer? All kinds of property! You may find single-family homes and multi-family homes, but also mixed-use properties and commercial spaces. It’s even possible to find a large shopping center for sale at the Sheriff’s auction. Any property seized by the court in which the borrower can no longer make mortgage payments, may be eligible for sale via public auction.

Where Do the Auctions Take Place?

As for where you can find these sales, it varies depending on the county you’re in, and also how many properties are up for grabs in a given window.

These auctions are open to all but be advised that you will be asked to verify you have funds available before you are actually allowed to place a bid.

What is an Upset Price?

If you do attend a Sheriff’s Sale, one term you’re likely to hear is upset price. This basically refers to the minimum price that the seller is willing to accept, and it may be either more or less than the total amount they need to recover their investment. Note that, if nobody is willing to bid the upset price (or higher), the property will not be sold at the auction that day.

You might also be aware that the lender may actually show up at the public auction to place a bid, hoping to drive up the final sales price. This is a perfectly legal and fairly commonplace thing to do.

How to Stop Sheriff Sale of Your Home

All this talk about being excited for Sheriff’s Sales – but what if it’s your home? That’s often not a good thing. The easiest way to keep your home is to pay your mortgage bills on time and in full in the first place. Each state has specific laws associated with foreclosure; the process and timing can change depending on where your home is. In any state you can stop the sale and cancel the Notice of Default by paying in full the loan balance and legal fees associated with the foreclosure. 

There are a couple things you can try to stay in your home. 

  1. Reinstatement – or paying the past due amount on the mortgage bringing the loan current. Partial payments made in the past will likely be returned to you or placed in “unapplied funds” and not put towards the loan until the full payment has accumulated.
  2. Try working out an agreement with the lender. 
    1. Creating a repayment plan, such as larger payments until you are caught up
    2. Forbearance, or in other words, a temporary pause in payments.
    3. Deferring the past due amounts until the end of the loan.
    4. Loan modification to lower your monthly payment so you can make consistent payments.
  3. FIle for Bankruptcy (Chapter 13). This route forces the lender to agree to a payment plan – usually in addition to the current mortgage rate. 
  4. File for a postponement of the Sheriff’s Sale. This is different in some states, but usually it must be done 15 days before the date of the Sheriff’s sale and will give you five months to work on the above options. In return it shortens your Redemption period to six weeks. 

Before trying any of these options check with your local laws and regulations in your area. Do your research to find out what option would be best for you in your state. 

Getting Ready to Buy at a Sheriff’s Sale

With all of that said, what steps should you take to get ready for a Sheriff’s sale?

The first thing you’ll want to do is connect with the Sheriff’s department to get a full list of properties that will be up for auction; this information is always made public. That way, you can review the different properties in advance, and potentially even enlist an attorney to help you run a title search.

Also make sure you bring enough money at least to make a down payment, which will typically be 10 to 20 percent of the total sale amount. Personal checks are seldom accepted, so bring cash or a money order. A certified check will also work.

Finally, note that the closing itself may take up to 30 days.

More questions about buying a house at a Sheriff’s Sale… or about different ways for selling your own property? We’ve got you covered. Follow the SOLD.com blog, and also be sure to request your free seller’s report today