How Does a Sheriff Sale Work?

So before I get started into the details of a sheriff sale, let’s refer back to a blog post in the summer about reverse mortgages. If you recall, we had placed an offer on a home that had been sitting empty for two years. Our goal was to pay the debt on this property and take ownership before it went into foreclosure. Once foreclosure starts, the bank takes possession of the property. This is the legal process used by the bank to recoup their money. Once the foreclosure process starts, it becomes near impossible to do anything. You are no longer negotiating with the owner, you are dealing directly with the bank.  At this point it is just a waiting game until they decide to post a sale date. Well long story short, this property went into foreclosure. We never heard back from the reverse mortgage company and it is now listed for sheriff’s sale.

So if you’re like me, you may not really know what a sheriff sale is and entails. It can be very confusing especially because you can have sheriff sales, auctions, tax sales and judicial sales and each of these carries their own set of rules and regulations. I am by no means an expert, but I did a little digging to get the basics of each of these to provide a general overview:

Tax Sale- This occurs when an owner reaches a certain point of delinquency in their property taxes. Prior to the sale the owner has the opportunity to pay off delinquent taxes and reclaim the property. If the tax debt is not paid off (with accrued interest) within the specified time, it will go to auction where the amount received for the property must be at least equal to the taxes owed.

Judicial Sale- This is a forced home sale used to repay a debt. For instance if a homeowner does not pay their mortgage after a certain amount of time, the bank can force a sale to recoup their money. If the full debt is not received at the sale, the homeowner may still be responsible for the remaining balance. This is very similar to a sheriff sale. Although, from what I was able to find this refers just to a mortgage, whereas a sheriff sale can be a multitude of debts or liens.

Auction- This is when property is sold to the highest bidder. The rules can vary since it is often up to the owner of the property what they are willing to accept.

Sheriff sale- This occurs when a property is repossessed. The proceeds from the sale are used to repay either a mortgage lender, bank, tax collector or other lien holders.

**A sheriff’s sale is what we are dealing with. The rules and regulations of the sale can vary by city and state, so the specifics that I will be referring to relate directly to Williamsport, PA.

Once we saw that this property was up for sheriff sale, we decided to give it one more try. The first step was learning what a sheriff sale was so we didn’t get screwed over in the process. With a sheriff sale it is the responsibility of the buyer to do their research prior to the sale. As the buyer, you need to do a title search, check out the taxes, and confirm if there are any other outstanding liens against the property. You don’t want to be surprised the day of the sale because things can add up fast.

Also it’s important to note, that these properties are NOT available for inspection prior to the sale. They are sold essentially sight unseen. Since we had pursued this property in the summer, we were aware of some issues because we had the chance to speak to the owner’s daughter. We have also stopped over to inspect the exterior of the property a couple of times to get a good idea of what repairs there are that we can physical see. I would recommend doing this for any property you are hoping to purchase so you can be as informed as possible.

The included graph provides a time line of events for the sheriff sale. The biggest thing to note is that in Williamsport, you have ten days to pay the 75% remaining balance on the property. In other cities, this can vary anywhere between 10-30 days depending upon where you live. Once the remaining balance is paid, the deed will be recorded ten days later. So the process itself is pretty quick, roughly 20 days for the total transaction.

Now onto the fun stuff- money. In order to purchase a property at a sheriff’s sale you will need a good amount of cash. Something we have done so we have cash handy (besides our savings) is take out a line of credit. We have both a business and personal line of credit. I would recommend this because it saves time trying to get a loan last minute and its money that is readily available if you need it. For the sheriff sale you will need to pay 25% down the day of the sale. The deposit can be paid with a personal or certified check. Ten days later you will have to pay the remaining balance along with 2% poundage on the first $250,000 and ½% on any amount over.  Keep in mind when you purchase real estate there will also be a transfer tax tacked on.

If for any reason the balance is not paid in full within ten days, the property may be sold again at the risk of the defaulting bidder. The deposit paid will then be forfeited.

Often times at sheriff sales, bidders are bidding directly against the bank. There will be someone there representing the bank and bidding on their behalf. The bank has a certain number they have to hit, and once someone bids that amount the bank will back out. If no one bids, the bank will buy back the property and it will typically go to a real estate agency to sell (but it can vary).

Going to a sheriff sale is a first for us. It will definitely be a learning experience, but hopefully we have done enough research that we wont have any surprises. At this point, we have about a month until the sale and were hoping things work in our favor. This home would need a lot of work, but it would be amazing when it is done. So stayed tuned for the next couple weeks and keep your fingers crossed for us! Can’t wait to share with you the results of the sheriff sale! (if its good ha!)

All of the information regarding Sheriff sales for Williamsport was taken directly from lyco.org