If you’ve been browsing auction sites like auction.com or checking your county’s sheriff sale website, you’ve probably come across properties that seem like great deals. These foreclosures or short sales might look like opportunities to snag a home for much less than market value. But is buying a foreclosure really as great as it sounds?
What You Need to Know About Foreclosures at Sheriff Sales
For starters, buying a foreclosure through a sheriff sale isn’t as simple as placing an online bid. Here’s what you need to consider if you’re looking at foreclosure properties:
- Sheriff Sale Process
You cannot purchase a foreclosure property at a sheriff sale from the comfort of your home. You must attend the auction in person. There is no “Buy Now” button. Additionally, you cannot inspect the property beforehand. That means you’re buying the property as-is, often with occupants still living in the home. This could mean additional challenges, like dealing with evictions or converting occupants into tenants. If you need to live in the home right away, this can create a major headache. - Cash Only Purchases
While it’s technically possible to use a mortgage for a foreclosure purchase, the sale is not contingent upon financing. In other words, you need to have cash or a cashier’s check in hand. This typically means bringing a sizable amount of money—sometimes as much as 20%—to the auction. If you overestimate and bring too much money, the sheriff will refund the difference, but you still need to be prepared. - Unseen Risks and Surprises
Foreclosure properties come with risks. For example, there’s a 10-day redemption period. After the sale, the original homeowner can reclaim the property or file for bankruptcy, meaning your winning bid might not secure the property right away. - Outstanding Liens
Many foreclosure properties have outstanding liens. These can include tax debts, credit card liens, second mortgages, or other legal claims against the property. As the buyer, you inherit these debts, so it’s crucial to do your research and understand the financial obligations involved. - Sale Reversals
One surprising issue is that sheriff sale purchases can fall through up to 120 days after the sale. This means you could spend months in limbo while the bank buys back the property or the seller files for bankruptcy.
Are Short Sales and Pre-Foreclosures Any Better?
If you’re not sold on the sheriff sale route, you might consider looking at short sales or pre-foreclosures, but they come with their own set of challenges:
- Short Sales
In a short sale, the homeowner still owns the property but owes more than the property is worth. These types of transactions require bank approval before the sale can go through, which adds time and uncertainty. You may also encounter inconsistent pricing, making it harder to assess the true value of the property. - Pre-Foreclosures
In a pre-foreclosure, the homeowner has defaulted on payments but still owns the home. These properties often require the help of experienced attorneys to identify potential title issues or liens. The added complexity and risk of a pending foreclosure could ultimately result in the property being auctioned anyway, even after you’ve put in an offer.
Who Should Consider Foreclosures, Short Sales, and Sheriff Sales?
Buying a foreclosure or short sale is not for the faint of heart. If you’re a seasoned investor with a high tolerance for risk and the ability to handle cash-only deals, then these types of properties may be worth exploring. But for most first-time buyers or those without the expertise and cash flow to handle potential issues, it’s not the best route.
Do You Need Expert Guidance?
The process of buying a foreclosure or short sale can be complex and full of potential pitfalls. If you’re still considering this route or want to learn more about these types of properties, it’s essential to work with a professional who can guide you through the process. I can help you navigate the risks and connect you with the right resources, whether it’s an attorney or lender, to ensure you make an informed decision.
If you want to learn more about foreclosures, short sales, and the process involved, I invite you to check out my video for further details. Don’t forget to subscribe to my channel, and click the bell icon to be notified every time I post a new video.
Let’s make your home the one buyers can’t wait to call their own!
