Houses at a sheriff's auction cost less than you would pay with a traditional purchase. However, this process is not simple and is fraught with dangers. You will need to have a title check run yourself or risk finding that there is no clear title to the property. You can't see inside the home or have it inspected. The property sells as-is, with no guarantee to condition. As a result, you can end up with a home requiring substantial repairs. You may also find yourself bidding against major banks and investors experienced at the process. Essentially, this is not for beginners.
Items you will need
- Listing of sales
- Cash or money order
Find what homes will be offered for auction. These listings are often placed in the local newspaper in the weeks before the auction, but can also be found via the sheriff's office or the county clerk's office. In many counties, the listing is available online.
Select the home that you are most interested in purchasing. For those looking to reside in the home, factors like location and school districts are important. You might want to purchase a home in a specific school zone or a certain distance from your job. You might also need a home that requires minimal repairs so you can move in more quickly. Investors, on the other hand, are more interested in the total cost for the project and are looking for a home that can be purchased and repaired for a small amount, compared to the amount they expect to make by renting or selling the property later.
Hire a real estate attorney to perform a title check on the property. Although this will cost you some money up front, you need to have a clear title to the property. If there are multiple liens on the property, it is best to choose a different home. Other issues with titles can include multiple claims of ownership on the home or boundary disputes. Regardless of what the issues are, it's best to know them as soon as possible.
Determine what you can afford to spend on a home, and what you are willing to bid for the particular home that you are interested in buying. This is a personal decision. Find the likely value of the home by evaluating other properties in that neighborhood. Keep in mind that there are no guarantees as to the condition of the home and you should have some extra money available for repairs if needed. Your budget may be partially determined by what your bank is willing to lend you, and you should take that into account when looking at home prices.
Acquire cash or a money order for what you estimate to be the required deposit. The amount of the required deposit varies from county to county, and your county can tell you what to expect. In many counties, the required deposit is either 5 percent or 10 percent of the selling price. This can be the most difficult part of the process because there's no real way to know what the sales price will be before you go to auction. There are several ways to handle this. If you are willing to pay cash, you can withdraw the maximum you are able to provide as a deposit and then re-deposit any leftover monies after the auction. You can do a similar thing with several money orders in various denominations, adding up to the purchase price of the home. Contact the county clerk and see if they will allow you to bring in the deposit the same day, allowing you time to withdraw the appropriate amount. Plan to pay at least 10 percent of the appraised value of the home, which many counties list on their auction websites.
Go to the sheriff's auction. The time and location of the auction will be available through the sheriff's office in your county. Place your bid. Be careful not to bid more than you can afford. The format of the bid varies, and you should contact your county to find out which type of bid they use. Some counties use silent bids, others use open bids and still others prefer sealed bids. The county can also provide you with the amount of fees required for the court costs incurred for the property, which is usually fairly small compared to the cost of the home -- a few hundred dollars.
Give the county clerk your cash or money order for the deposit if you win. Find out how long you have to provide the remainder of the payment. In some counties you will have only 24 hours, but in other counties you have a week or longer.
Take receipt of the deed from the county clerk's office and purchase title insurance to protect your investment.
- Many homes are pulled from auction prior to it beginning. This usually happens because the bank has purchased the home or the homeowner has remedied his default. Be prepared for the possibility that the home you are interested in may not be available for bidding after all.
- If there are people living in the home, you may need to work with the sheriff's office to evict them before you can take up residence in the home yourself.
- The amount of money you will need to have for repairs can vary widely from property to property. You have to decide how much you can afford for repairs and if you think the property can be made livable with that amount.
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