buying property on the courthouse steps?

Discussion in 'Homesteading Questions' started by clamjane, Jan 12, 2007.

  1. clamjane

    clamjane Well-Known Member

    Messages:
    420
    Joined:
    Sep 5, 2005
    Have any of you ever bought foreclosures that were auctioned off on the courthouse steps? Has anyone here ever been to one of those things? I know I just have question after question, but I would like to know what happens, how is it usually conducted, and how do the mortgage companies or other lien holders figure into this? Do you just put up enough cash to satisfy the delinquent taxes and that is it?

    I hate the thought of trading on someone else's misfortunes, but I need to find a place to live and I don't have scadoodles of money, but I do have some. Please let me know what you think about this idea and any likely pitfalls I might encounter. Thanks
     
  2. m39fan

    m39fan Acres of Blessing Farm

    Messages:
    237
    Joined:
    Apr 11, 2005
    Location:
    Gambier OH
    clamjane,
    I haven't but have a friend who did this. Here's what I noticed with him:

    1. the properties are usually abandoned or derelict and will need ALOT of work.
    2. Leins on the property can often become your responsibilty. Check with your locality to see if this is true in your area.
    3. If in a rural, "good ol' boy" area, you'll often immediately alienate all your neighbors. You'll be the person that kicked those "poor" people out. It's all legal but try living out in the boonies without at least cordial relations with the neighbors. It's not fun and I've heard of fire calls that no one responded to because the new owner bought the property this way.

    I'd much rather find someone willing to sell on contract if bank financing is an issue.

    Just something to consider. Good luck with your seach, I hope you find something soon.

    Take Care,
    Mike
     

  3. agmantoo

    agmantoo agmantoo Supporter

    Messages:
    10,855
    Joined:
    May 22, 2003
    Location:
    Zone 7
    I have bought twice off the courthouse steps. Both purchases were very beneficial. One sale was to settle a multi partnership when one of the partners died and the others could not come to agreement on how the deceased partners family were to enter into the daily operations of the partnership. The surviving partners chose to have the auction. The second was to settle an estate where the prior owner passed and his estate owed the government. None of the family wanted the property and the executor failed to carry out his duties in the time period allocated so the judge ordered the public sale. Realize, IMO you are not taking advantage of anyone as all persons have to ability to bid and after the bid is submitted typically there is a 10 day upset period. The properties were sold to have nothing more than the property taxes in arrears and both were covered by title insurance that I purchased. I still have both properties and have no intention of selling. One property has had the timber harvested and the proceeds covered the purchase price. The other property has appreciated so much that if I were state the percentage no one would believe me. I would aggressively pursue researching any property that was to be auctioned at the courthouse steps if I were in the acquisition mode.
     
  4. Clifford

    Clifford Love it, or leave it...

    Messages:
    402
    Joined:
    Aug 14, 2004
    Location:
    Wausau, Wisconsin
    Here, you need to immediately put 10% down on the price of the sale. Call your county seat to see what the requirements are. Normally the sheriff sells the property.
     
  5. hoofinitnorth

    hoofinitnorth Well-Known Member

    Messages:
    3,606
    Joined:
    Oct 17, 2006
    Location:
    Alaska
    Have been to a few. Have not purchased.

    Go watch a few. Get used to how the work and try to learn about the properties beforehand so you can understand more about what is happening. Sometimes bidders and buyers will talk to you and share ideas if they are friendly and have time (and don't see you as a threat).

    Then go talk to your friendly banker/credit union lender. Go find out what they suggest and what they can do for you. YES, you CAN get a loan to purchase a property in foreclosure.

    GET A TITLE POLICY. Sometimes these are available by the seller/auction company, other times they are not and you will have to order one - can take a few weeks sometimes, depending on how backed up your local title agencies are. DO NOT buy or even bid on a property without a title report. As m39fan pointed out, liens on the property can become your responsibility! Other-much worse and more expensive things can happen too. Do as much due diligence as you feel you need to do to mitigate your unaffordable risks and then plan for more (hopefully that are affordable) that you can't find out about. For instance, if you are worried about lead paint, asbestos, or buried fuel tanks that could be leaking, buy newer properties or ones you can easily verify do not have these issues.

    If you can gain legal access, go INSIDE the property or one just like it. Talk to the neighbors.

    When you bid, the seller is often the lender (not always a bank) trying to get the remainder of their loan. This usually enters as the minimum bid. If not a lender, the seller could be an estate, a taxing authority, a condemnation authority (think property purchased for highway expansion that never occurred and now plans have changed so they need to unload it), or other lienholder that foreclosed, etc. SOMETIMES the minimum bid will be ABOVE the value of the property - as in someone that mortgaged the place to the hilt (it is not uncommon to see foreclosures with 105%-110% LTVS, thus why they went into foreclosure when the buyer couldn't pay - they were "upside-down" (owed more than it was worth) and could not sell and get enough proceeds to sell & pay off the loan!). This is especially true if the local market has dipped in values. However, it does not HAVE to mean that the LTV was over 100%, it could have been 80% but a real estate commission might have made it not worth the trouble or the marketing times might have been extended too far out to be reasonable to deal with. Many, many foreclosures occur for dumb reasons - someone that doesn't have a lot of income or is on a fixed income with a paid-off property that was foreclosured upon for a few measely thousand bucks in back taxes. They probably should have gone to the bank for a loan to pay off the taxes but either didn't want to, didn't know how to, or didn't think they could/couldn't afford even the loan payments.

    Realize that you may be outbid. Try to anticipate the most the lender/taxing authority/lienholder is trying to get and then how much others competing with you are willing to pay. Be careful not to get caught up in wanting a property for emotional reasons.

    Don't get caught up in the real estate foreclosure scams that try to sell you "how tos" on buying cheap real estate and making money at closing, etc. They can happen but are so darned rare and often have other weird stuff going on like tax credits for re-habbing the homes in a bad area, etc.

    Realize that most foreclosures sell in pre-foreclosure status long before they get to the courthouse steps. This is less of an issue for you if you are trying to find a cheaper place to live vs. an investment but it may be hard for you to get emotionally and financially invested in a property that will never be available to you for purchase.

    Good luck!!!!
     
  6. clamjane

    clamjane Well-Known Member

    Messages:
    420
    Joined:
    Sep 5, 2005
    Good advise all, Thank you
     
  7. tnhomestead

    tnhomestead Well-Known Member

    Messages:
    149
    Joined:
    Jul 22, 2006
    Usually in a foreclosure, the mortgage company bids whats owed on the property so they dont lose money. My old boss used to go to the people 2 weeks or less b4 the auction, and buy the property from them for what was owed to the mortgage company -- they dont get foreclosed that way so it helps them, u get the property cheeper hopefully than at auction. Its worked for me too.
     
  8. uncle Will in In.

    uncle Will in In. Well-Known Member Supporter

    Messages:
    7,154
    Joined:
    May 11, 2002
    Each year the county auctions propertys that are two years behind in taxes. The owner has a period of time to pay the back taxes plus interest which you will get if its not too late

    A forclosure it not the same thing. These are called Sherrifs sales. They are in reality held inside the courthouse around here. If you out bid whoever represents the mortgage holder and other bidders, The Sherrif will give you a quit claim deed to the property. Lenders use this method to reclaim the property and take all claims away from the original buyers.
     
  9. edcopp

    edcopp Well-Known Member

    Messages:
    4,422
    Joined:
    Oct 8, 2004
    Location:
    Ohio
    A little knowledge is a dangerous thing. The process is a little different from state to state and even from county to county within a state. That said it is very interesting.

    In foreclosure the lender brings the action that leads to the sheriff's sale. The action goes before a judge who issues an order for a sheriff's sale. The process is usually advertised in a local paper for several weeks before the judge gets the case. Then the judge orders the sheriff to sell the property. The sheriff arranges for an appraisal, and advertises the sale for several more weeks.

    On the day of the sale the sheriff sells the property at auction, on the court house steps. In my area it takes 10% down on the day of the sale, and the balance at closing within 30 days. Cash is king here. If you do not or can not close on time with cash then you lose your 10% deposit.

    If there is a mortgage on the property the lender will most likely bid on the property until the amount owed is reached. Often that bid will be higher than the appraised value of the property. There may be other mortgages or leins on the property. Some may be extinguished by the sale and some may not. Depends on what kind they are and where you are.

    Sometimes it is a good way to buy property, and often it is a "good ol' boys" scam. If you can't tell the difference be careful. It is not unusual to see property sell that has, no road frontage, EPA clean up orders and so on. Often there will be federal leins on a property that do not readily show up in a county court house. This can be fun.

    Now other than a few pitfalls mentioned here a sheriff's sale can be a good way to acquire property. Just be aware of the possible problems. :)
     
  10. Kevingr

    Kevingr East Central MN

    Messages:
    609
    Joined:
    Mar 10, 2006
    Location:
    MN
    edcopp hit the mark, each state is different. Here in MN you cannot take possession for 6 more months after the sale. The homeowner has what's called a 6 month Redemption period, where they can buy the property back for what they owe. They can still live in the property during that time, which means what you looked at today may not be the same 6 months from now. There is a way to get the homeowner out in 5 weeks, but you need to get them to sign their rights over to you. Why would they do that when they can live there for 6 months for free?

    Learn the process where you want to buy.
     
  11. Jolly

    Jolly Well-Known Member

    Messages:
    5,511
    Joined:
    Jan 8, 2004
    Location:
    Louisiana
    A sheriff's sale is one thing, but I've known several people who've bought property for back taxes.

    Down here, the original owners can come back and pay the taxes (and pay for any improvements made on the land) within a specified time frame, and reclaim the property.

    The trick is to find somebody that doesn't want the place, or ain't coming back.

    The best case I know of involved an abandoned railroad right-of-way. It was bought for back taxes of just a few hundred dollars. The buyer cooled his heels, paying the taxes each year for 5 years, just letting time go by. At the end of that time, he immediately sent a notice to all parties that were crossing his land without benefit of right-of-way to get to their homes or businesses. Since the land in question was across the road from a casino, on a major hiway, those right-of-ways purportedly brought several thousand dollars.

    Early bird gets the worm....
     
  12. Spinner

    Spinner Well-Known Member

    Messages:
    6,727
    Joined:
    Jul 19, 2003
    I think each county can make it's own rules so what works in one county might not work in another. You need to check it out in the area where you want to buy.

    Example:
    In one county I lived in the properties never went for sale. The county clerk bought them all for back taxes before they got that far. If you wanted to buy one, you had to do the background checks and search them out keeping your fingers crossed that you found them before the people who work in the court house bought them.

    In another county where I wanted to buy, they changed the rules a few days before I went to check on the properties. Now they list them with real estate agents and sell them for appraised value instead of taxes owed. The county decided to make some money off the tax properties.

    In the county I live in now they use a lottery system. I was told they put everyones name in a hat and draw a name for each property. If your name is drawn then you are the only one to have the option to buy. If you don't choose to buy, then the property is not sold. They put it on the list for the following year, but it's usually not available the following year. I've never did a search to find out if the owner redeemed it or if it was transferred to someone else.

    Those are 3 examples of systems I've run across. I'm sure there are many systems used in various counties.
     
  13. fantasymaker

    fantasymaker Well-Known Member

    Messages:
    6,787
    Joined:
    Aug 28, 2005
    Location:
    IL, right smack dab in the middle
    Gotta be carefull with Right-of-ways railroad or not, often they dont own the land just the right to have something cross it.Like a pipeline ,railroad or electric line If you dont have a railroad to put across it its pretty worth less if thats all you can do with it.