New real estate investors interested in sheriff sale auctions should know there are differences between the types of auctions out there. In this article, we will discuss what makes a sheriff sale auction, including what it is and how different aspects vary between locations.
What is a Sheriff Sale Auction?
The purpose of a sheriff sale is to sell a repossessed property to fulfill an unpaid obligation by the current owner.
A sheriff’s sale auction is similar to a foreclosure auction except for one major difference.
At a foreclosure auction, the lender is selling a property it foreclosed on through its own means.
At a sheriff sale auction, the sheriff is selling a property the lender or other lien holder foreclosed on with the approval of a court order. A sheriff sale auction will only occur after a foreclosure trial of real property. The court will order the local sheriff to auction off the repossessed real property only if the mortgage lender wins its case at a foreclosure trial.
Who Can Drive Sheriff Sale Auctions?
It’s not just banks or other mortgage lenders that use sheriff sale auctions to recoup funds from delinquent borrowers. Unpaid judgement liens or tax liens can also be reasons properties end up in sheriff sales. Banks, condo associations, contractors, tax collectors, and other litigants can collect money lost on property using sheriff sales.
Sheriff Sale Auction Steps
Sheriff’s sale auctions are preceded by a series of steps including the mortgage and foreclosure process. The borrower that takes out a mortgage for a property must meet the agreed payment requirements as stated in the contract. If the borrower defaults on the mortgage, then the lender will have claim to the property. A sheriff sale is a way for the lender to recoup the costs of the mortgage on the property.
Yet, unlike a regular foreclosure auction, a sheriff sale is the end result of a court issued directive for the lending institution to auction the property. This is because the foreclosure took place in the court system, as opposed to the lender repossessing the property on its own. A sheriff sale auction cannot take place without being started by the courts.
Sheriff Sale Auctions in Different States
Sheriff sales operate very similarly between states. These similarities include when and where they take place and the rules that they follow.
Investors need to find out the specific county rules for sheriff sale auctions in the county they will be looking to buy a property in. They can do this by accessing county websites, which will usually offer information about the sheriff sales they have planned.
Right of Redemption
A ‘right of redemption’ often comes with a sheriff sale, depending upon the state. This allows the original homeowner to repurchase the property after it has paid the debt and costs associated with it. The ‘right of redemption’ can very from state to state, and even county to county.
For example, in California the homeowner does not get a right of redemption if the property is foreclosed independent of the courts (non-judicial foreclosure). Sheriff sales are not as common in CA as other states, because this state operates a system of non-judicial foreclosure. However, California sheriff sales do have a 1 year right of redemption, allowing the homeowner to buy back the home after paying off the debt and other associated costs before the end of this period. In California a home is much more likely to be sold at a foreclosure auction than at a sheriff sale auction.
In many other states, the only way a lender can sell a repossessed property is through a sheriff’s sale. Again, it’s crucial to know your state and county laws.
Where Sheriff Sale Auctions Take Place
Most sheriff sale auctions occur at the courts building in the county where the property is located. Each county has their own sheriff sales that take place at least once each month, often during the first week of the month.
Know Your Auction Types
In this article, we discussed what a sheriff sale auction is and how they work. It pays to know your different auction types from location to location to ensure you don’t get caught making costly investment errors.