The Secret World Of The Sheriff Sale
You’re house hunting. Scanning properties on Zillow is your new pastime. Among the listings, you see that ubiquitous red dot showing a listing is up for auction. Without knowing how it works, most property hunters skip onto the next listing. Your agent will tell you to forget about it. Makes sense, since there is no commission to be made. Yet, buying at sheriff sale is no more complicated than through a realtor. Not to mention it may perform a service to the community. In 2017, 18,700 properties went to sheriff sales in Philadelphia alone. Pre-pandemic 6 to 7 sheriff sales were held each month, with 300 properties going up per any one sale.
What Is A Sheriff Sale
A sheriff sale is an auction where a local government is seeking to recoup delinquent property taxes. A property going up for auction doesn’t happen overnight. The city will send that homeowner several notices regarding their unpaid taxes. If ignored, they’ll send a notice to the address that the property may go for auction. Later, they’ll post a notice on the front window of the property, still giving ample time to set up a payment plan. There’s also the likelihood the property is long abandoned.
How Do Sheriff Sale Auctions Work
Anyone can go. There are several auctions each month. Some are mortgage auctions. Some through law firms acting as collection agencies on behalf of the city. There’s also the tax delinquent sheriff sale that’s held by the city with a low starting bid. You can find useful videos on YouTube breaking down the entire process and what’s expected of you when you’re ready to bid.
Attend at least three auctions before bidding. You’ll see a hodgepodge of characters, from scruffy construction guys to those dressed in suits. Locals, from parents to hipsters, stand up ready to bid and are swiftly intimidated by the competition between the sharks, LLCs and various investors. You’ll find them at every auction, snatching viable properties in a land grab, outbidding the more timid attendees. The no-nonsense auctioneer seems to know all these regulars by name. Don’t let that stop you, though. It’s not every neighborhood they’re interested in. They’re looking for a quick flip.
Those same sharks pass out brochures outside. They’ll offer to sell you properties bought at previous sheriff sales for hiked up prices, and they’re often undesirable lots. Inside, other profiteers sell a sort of classified zine which lists the properties coming up at that auction. Though it costs a few bucks, it can be a worthy expenditure for the sheriff sale novitiate.
Preparing For The Bid
The property you had your eye on may end up stayed or postponed for a variety of reasons. It’s always good to have another property in your sights as a backup if you’re hot to buy. The winning bidder needs to have a cashier’s check for a percentage of the winning bid. This is nonrefundable. They’ll have to pay the remaining balance within a timeframe or risk forfeiting their deposit. Don’t bid if you can’t back it up with cold hard cash.
Do Your Research
Though these vary based on your municipality, they basically operate the same. You can view a list of properties for each auction online. Customizing your search is easy. Go to the city’s tax revenue department website. Look up the last legal owner. Do some research and determine if they are living or long deceased?
View the property on Google. How’s the roof look in that satellite image? If it’s bad, there’s likely mold or other issues worth factoring into your budget. When was the image taken? Go to ‘Street View’ and do a walk around to determine the condition of the property. Or better yet, check it out in person.
Lookup license and inspection violations and/or permits for the property. It may say UNSAFE STRUCTURE, and that’s a pretty clear tell it may not be the most ideal investment. If VACANT PROP STANDARD is listed, however, this shows someone registered the house as a vacant property for a tax break. That means there’s no one to evict if you bid and win.
Don’t Learn The Hard Way
No one will sell you title insurance in the first year of owning the property unless you commit to getting title insurance before you bid on it. Most title companies offer insurance on the property no sooner than one full year after the sheriff’s title was issued to you. So don’t think you’ll be able to flip it and make a quick buck.
Right Of Redemption
When someone buys someone else’s house at auction, and if they lived in that house within the last 90 days, they have what’s called a right of redemption. 9 months following the sale, the previous owner can pay their back taxes, the cost of the winning bid, and the cost of any indisputable renovations. If all of this is accomplished, they redeem their house. The reason a title insurance agency won’t insure the property is due to ‘right of redemption’. Considered a high-risk policy, few insurance agencies will offer it. All the more reason for doing research on the last registered owner.
Sheriff sales are neither simple, nor are they out of reach. Do your homework and you may get that $170,000 starter home you dreamed of for only $42,000 plus another $35,000 of DIY renovation work. We live in an age where old buildings are torn down for newer homes with lower standards for construction. If you’re looking for an affordable home within your reach, consider restoring and renovating that old vacant house. You’d be preserving a bit of your city’s history and your neighborhood’s character, all for the cost of a down payment on a mortgage.