Let me take a moment to back up and explain the process of buying a home at sheriff’s auction. Buying a house this way is something many people skip as they aren’t aware of the process. The truth is that you have the potential to find great deals if you’re willing to put in the work.
You could also end up with a money pit.
For us, every step is about limiting risk. Houses at sheriff’s auction are sold “as-is, where-is” and “sight unseen.” Meaning there are no showings, open houses, or guarantees. No easy way to back out, and a lot of unknowns. If you can limit the unknowns, you limit risk.
Other auction processes vary, and we have been to a few that take place in the property- buyers have a quick chance to walk around before bidding. This article will focus on sheriff’s sales, but there is overlap between the prep for the different types of auctions.
Finding A Prospective House Online
First, we check out the docket online. There is a list by township of the properties, their appraisal amount, minimum bid amount, and the sale date.
Having lived in this area for most of my life there are neighborhoods I am more comfortable with, and some that are closer to home. I stick to those because it gets to be too much to drive back and forth with the kids to do renovations if we have a long commute. In the future, when they are all in school, we may open up our search criteria.
After checking the docket I will run a simple google search of any property that I find interesting. Zillow can quickly give me the details about previous sales while also displaying any old listing photos and information. A recent-ish sale means that it passed inspection prior to that sale. Good news for us! However, it also means that the judgement amount will be higher as the owner didn’t have as long to pay down the balance of their mortgage.
If I am still interested, I will pull up the county auditor and delve in deeper to become as informed as possible.
In general, I look for houses that have 3 or more bedrooms with more than one bath.
Now, this could also include a house that has 2 bedrooms but room for a third, or one bathroom and room for a second… you get the idea.
I have found that these houses are the ones that sell quicker and rent well where we live.
I then run a search to find out about the owners and to pinpoint why the house is being sold. Are they incarcerated? Did they pass away? Or did they just stop paying?
In Person Verification
If we decide to move forward with a property we then go to see it in person.
We will do a drive by of the house at least once.
If it is vacant we will do a quick walk around the exterior, gauge major improvements, and look for obvious issues. (roof, windows, AC, foundation/structural breakdown, neighborhood, location)
Sometimes a property looks amazing online, and then when you pull up you realize there is a huge electrical tower in the backyard or no parking nearby.
Or, sometimes you can see that the information listed on the auditor doesn’t match the property that you’re walking around. The owners may have created a huge un-permitted addition, causing some red flags to go up in our mind.
Personally, I want a house that at least has a driveway. Since we do a lot of the work ourselves, I don’t want to have to hunt for parking, fight for permits for a dumpster, or haul my tools up and down the block.
Is it Vacant?
If the house is vacant go straight to go, and collect $200.
Just kidding, but a vacant house is a lot less of a hassle (and money) than an occupied house.
If the house is not vacant we will knock on the door and see if the homeowner is there. In the case of the Palace, we knew from our research that the owner’s husband had passed away a few years prior.
What if he was the one who always paid the bills and she didn’t realize that she needed to make the payments? What if she had funds in an account to get caught up?
We are not in the business of stealing homes. I would hate for the owner to not realize that their house is being foreclosed on. Yes, the county sends A LOT of notifications, but you would be surprised by how many people think that it’s not really going to be sold.
Luckily, she was home and we were able to talk to her. She knew that the house was being sold and was looking for an alternative place to live already. The house was too much work for her. She said she needed to live in a place that offered assistance.
We offered to buy it from her, avoiding the auction process. This can be a time and money savings route if you are able to do so. She declined, saying her son had told her that nobody would buy it. We let the conversation drop, knowing we could just wait it out until the auction.
Soon to be vacant, counted as a vacant property for this one.
Someone Lives There
If someone is living there, they either rent or own. If they rent, walk away. You can contact the homeowner to see if they will sell but don’t bug the tenants.
If they own, you can talk to them, like we did, and find out the inside scoop. We approach this with care, and the utmost respect, this is someone’s home! It is an emotionally charged situation to begin with.
We have not yet gone through the eviction process but there are two in place, one for owner occupied and one for tenant occupied houses. Either way, it means a significant time delay before you can get into the property and start work. There is also an increased potential for damage to the property when they leave.
There is nothing quick about the auction process to begin with, so we choose to avoid additional delays and holding costs by skipping those properties.
Final Prep Before the Auction
Okay, so we’ve done all of our research. We’ve driven past the property, and decided that we want to go for it. Next, we pick a top end bid amount.
We gauge the fixed up value of the home by comping it out. Then estimate the cost of repairs needed using the information we gathered during the drive by and online search.
When we want to keep and rent these houses rather than fix and sell them, we estimate the rental income ROI and cash flow.
Working backwards we can determine a safety net buffer, and our top bid.
We want to have a top end number going into the auction, it can be easy to get caught up in the emotion of the bid or become attached to a house.
It is just a house, there are always more.
If the bidding goes beyond what you had allocated, let it go. It’s not worth the financial strain, especially with the unknowns involved here.
In other auction sales (private) some people will bid up a house just to see how far you’ll go because the terms are different and they may only lose $150. Or the seller may have no intention of selling and they are just gauging market value.
Other kinds of auctions can have fees associated with them that are a certain percentage of your bid amount on top of the bid price- this adds up! Be sure to know the terms of the sale.
The sheriff will list the terms of the sale and then read out the properties one by one. Bids can come from the bank as well as individuals looking to purchase. Usually we know what the judgement amount is going into the sale, so we have a rough idea what the bank is looking for.
When it’s our property’s turn, we bid! This is the fun part. Enjoy! The kids like watching the bids ping around the room. Our oldest gave me a high five when we “won,” eliciting chuckles from people around us.
The auction is normally a very serious process, we make sure to tell the kids that there can be no talking during the sale.
After we have successfully bid, we fill out forms with information on how we would like the house to be deeded, and hand over our cashier’s check deposit.
We Got A House! Now What?
This is the “hurry up and wait” part. We won’t have possession of the property for a while.
The law firm that is handling our case will need to file a confirmation of sale. This can take 2-6 weeks, potentially more. It depends on how busy they are.
Until the confirmation of sale paperwork is filed AND signed by the judge, the previous owners have an opportunity to get current on their payments. If they do, you get your deposit check back and begin the process again.
Once the paperwork is filed, and signed, we have 30 days from that point to make a payment in full: the bid amount minus the deposit already paid.
On our first auction property we were able to obtain bank financing, and it was by the skin of our teeth that we met the 30 day deadline. That was many years ago, now the banks take longer to close. Since we don’t have access to the properties until the sale is paid for, you can’t have a bank appraiser go through. No appraiser = no financing.
We head to the bank to get another cashier’s check. Then a quick trip down to the Justice Center to pay the balance and congratulations! We own a house!
Green Light, Go! Mostly.
Now we can officially take possession, change the locks, and begin renovations!
We call to put utilities in our name (electricity, water, garbage depending on the township), and get homeowners insurance in place.
If there are any personal belongings left in the house we must legally send a certified letter notifying the previous homeowner. They have 30 days to collect the items. I give a general description of what is there and list my contact information.
I send this letter out the same day as I pay the balance at the Justice Center, we don’t want to wait longer than we have to.
We could pay to store the items offsite and begin work immediately. However, depending on the volume of things remaining, it can be cheaper to just move it to one part of the house. That way we can begin work on other areas and there is no question of items going missing. The holding costs are minor since at this time we are going through and lining up work anyways.
The last thing I want to do is have to pay a replacement value for someone’s junk.
Full Speed Ahead
Once the 30 days are up, we can get rid of it all! It is a liberating feeling knowing that there’s no more liability hanging over our heads. And no more personal belongings at our feet!
This is where my minimalistic tendencies kick in and I feel the urge to rid our own house of any excess.
Seeing the sheer volume of what remains.
Leftovers of a family home.
It’s a good kick in the pants motivator.
There’s a quote that says something along the lines of “I’ve never been to an estate sale that didn’t have a dumpster.”
It’s true, there’s a lot that goes unnoticed until it is time to pack it up and move.
Stuff that has blended in simply because it has existed in that space for so long.
Things that we’ve become blind to.
Boxes and bags at the ready, we begin.
Things that are clearly trash get thrown out, and we donate or list the remaining items for free on Craigslist. The goal is to get rid of it ASAP.
Then the renovation work can begin!
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