Every County in Pennsylvania conducts periodic sheriff’s sales of real estate. They may be every month or every few months. The sales are conducted in an auction format with open bidding. The properties at sale are being sold at the behest of a creditor attempting to recover money owed. While there are numerous opportunities, there also exist numerous risks. In order to minimize the risk, the following is intended to identify some of those risks and provide some helpful tips. Please keep in mind that this list does not identify all potential risks. The first and best tip is that you should contact an attorney.
I. Preparing for the sheriff’s sale.
A. Order title report for the property on which you intend to bid.
B. Review service on lien holders and owner and compare against title report. You can get the proof of service from the sheriff’s office. Lien holders not notified of the sale 30 days in advance are not ordinarily discharged. IRS liens may require additional steps in order for the sheriff’s sale to discharge the lien. Consult counsel to confirm the service and notice requirements.
C. Contact counsel for foreclosing creditor and/or owner of property if able regarding the creditor’s minimum bid since the creditor can credit bid its judgment. Also you should be able to better assess the likelihood of the sale proceeding, and any information on property.
II. Some Potential Risks of buying at sheriff’s sale.
A. Foreclosing creditor does not notify all lien holders or owner.
B. If the holder of a second mortgage forecloses, the sale will be subject to the first mortgage.
C. Successful bidder buys property “as is,” no inspections, no contingencies.
D. Prior owner may not leave voluntarily leading to delays and additional costs.
E. If it seems too good to be true, it probably is!
III. Procedure at sheriff’s sale.
A. Must have 10% of your bid in cash or certified check at the sale.
B. Balance of funds due within a few weeks of sheriff’s sale. There is no mortgage contingency or other contingencies that are ordinarily associated with closings. You will not be able to finance this in the traditional sense. You will need to have the cash or access to the cash for the full amount of your bid.
C. Within a month or two, the sheriff will post a schedule of distribution. If there are no objections to the proposed distribution, the property will thereafter be deeded to you.
D. The vast majority of sheriff’s sales are postponed from the first listing or stayed by bankruptcy.
E. Consult your local sheriff for additional information on procedures and listings of properties for sale.
Again, purchasing a property at sheriff’s sale is a risky proposition. An alternative is to contact the foreclosing creditor after the sale assuming, of course, the foreclosing creditor was the successful bidder. The foreclosing creditor often will take back the property on higher value properties. By buying from the creditor, one can avoid many of the risks associated with buying at the sheriff’s sale. The risks listed here are not exhaustive. This is simply intended to highlight some of the more common risks and issues. Please feel free to contact John Fiorillo if you have any questions.