If a homeowner is unable to take advantage of foreclosure alternatives, foreclosure proceedings require a forced sale of the property, known as a foreclosure sale or sheriff’s sale. A foreclosure sale entails sale of a property, commonly through an auction, under authority of a court judgment in order to satisfy an unpaid obligation. In some states, this forced sale is done through a trustee sale.
A Glimpse at Foreclosure and Sheriff’s Sales
- The sales are usually listed among the legal / judicial notices in the local newspaper. Some municipalities have lists to which you can subscribe. Still others post the upcoming properties to be sold or auctioned on their website.
- The scheduled sale of a particular property is published for a specific number of weeks prior to the sheriff’s auction / sale, depending on the state law.
- Even though the auction / sale of a specific property may be advertised and scheduled, often properties are not actually auctioned that day because the property owner has either sold it or reached an agreement with the lender (Workout option or short sale) that takes the property “off the auction block.”
Foreclosure Sales Pose Unique Considerations For Buyers
- The opportunity to conduct property inspections can be negligible or extremely limited. Buyers should not expect to schedule a property inspection before the sheriff’s sale takes place. Potential buyers usually have limited or no access to properties offered at a foreclosure sale because they are often still occupied by the owners or tenants.
- After completion of the sale and approval by the courts, it may be necessary for the buyer to initiate legal action to evict the occupants.
- Buyers are still responsible for paying any outstanding liens on the property.
- The possibility exists that the buyer may not receive clear title. For example, if a special warranty deed is issued, clear title is not guaranteed.
- Buyers may be impacted in states that offer borrowers the right of redemption.
Why Most Foreclosures Go Back to the Bank
- The minimum bid the lender will consider at the auction is typically more than what a buyer is willing to pay. Just the mortgage alone is often more than the property is worth, and when you consider the extra costs incurred by the lender as well as delinquent property taxes, legal fees, etc., the property is not a bargain.
- In an area of declining property values, savvy investor buyers will not pay what is owed since that would be more than the market value of the property. Additionally, most investor buyers who attend these sales are looking for bargains. Consequently, the property goes to the lender.
- The pool of well-financed investors has diminished in many markets.
These issues, plus those mentioned previously, are why, in most cases, the foreclosure or sheriff’s sale does not bring viable buyers for the property and the lender takes the property back.
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