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What exactly is it? Does that mean they auction the house off? What price do they start at? What's the difference between that and a HUD or REO?
Yes, at a Sheriff's Sale, they are auctioning the property. It's part of the forclosure in many states, including NJ. It's different from REO or HUD in that the property is still owned by the mortgagee. The sheriff sale is the final step in taking it from them for failure to pay the note.
What I know of Sheriff sales I know from going to a good many of them in NJ. Different rules may apply in other states, so please check with someone local before relying on what I say to be true wherever you are.
By the time a property gets to Sherrif sale in NJ, several notices have gone to the owner. They have missed several payments. We can discuss the process to get there another time. At the sale, the facts & info about what is owed to the lender are made known, along with the address of the property and the owner. The person conducting the sale (a representative of the Sheriff) announces the auction open and asks if there are any bids. In almost every case, a representative of the bank will be there & will open the bidding at some low number. $100 is what I see most often. Anyone else who wants to bid can then bid. They have to identify themself as well as the person or company for whom they are bidding, if it's not themself. Whomever bids the highest buys the property. The lender has set a minimum number, which no one knows except the lenders rep. That rep will continue to bid until that minimum is reached. If he is the high bidder, the bank takes posession of the property. If the bidding gets above the banks minimum sale price, they step back & let whoever wants it buy it. The high bidder must pay, at the end of the auction, 20% of the bid price. The remainder is due within 30 days. Special note should be taken of the fact that purchasing at sheriff sale may not give you clear title. There may in fact be liens, including tax liens, still on the property, which then become the responsibility of the buyer. Additionally, a defaulting owner whose proerty has been sold as sheriff sale has ten days from the sale to redeem their property by paying in full the delinquent amount.
It is a similar process in FL. Biggest difference is that everyone knows what the minimum price is that the bank will allow the property to be sold for, it is even posted on the County Clerk's website. If nobody bids the minimum amount the property reverts to the lender. The winning bid must be paid by close of business the day of the sale or the property goes back on the auction block.
As far as I know ...auctioned houses don't mean to have clear titles....We had a house auctioned off to the HOA who bought it for $ 100.- and the HOA knows they will be foreclosed on by the bank since the HOA is not going to pay for the mortgage, but that way they can negotiate to get the $ 6 K the owner owed to the HOA, back from the bank and the title will change hands again...so you really have to know what you are doing.
I couldn't believe the house was auctioned off for $ 100.- but it is recorded in the public records so that is proof enough after the HOA and the county clerk had told me the same.
As far as I know ...auctioned houses don't mean to have clear titles....We had a house auctioned off to the HOA who bought it for $ 100.- and the HOA knows they will be foreclosed on by the bank since the HOA is not going to pay for the mortgage, but that way they can negotiate to get the $ 6 K the owner owed to the HOA, back from the bank and the title will change hands again...so you really have to know what you are doing.
I couldn't believe the house was auctioned off for $ 100.- but it is recorded in the public records so that is proof enough after the HOA and the county clerk had told me the same.
Something sounds wrong here. If it was a Sheriffs auction, the bank wouldn't have let it go at that price, as they know they can take it into inventory & sell it for more. If it's any other kind of auction, the bank is going to demand full payment of the loan before title can change hands. There are some fact & details that have been left out, or misconstrued.
So, with a HUD or REO does that gaurentee a clear title without liens?
Well, nothing GUARANTEES that, until you've done the title searrch & bought title insurance. But...
When you are buying at a forclosure auction, (known in NJ as a Sheriffs auction) you are told, before you bid, that their may be liens other tan the mortgage, and that you are buying the property subject to those liens. Finding out later that the guy was $30,000 behind in his taxes and has 2 mechanics liens for another $13,000, is not going to let you out of the contract. You bought it. When buying a bank owned property, you are writing a contract to purchase, just as if you were buying form the person who owned & lived in it. All the standard contracts say that you expect to be getting a clear title without any encumberences. If you do your title search & find that there are other liens, you have every right to demand they be romoved. If they are not, you can simply refuse to purchase the property. The banks know this, and usually (note, I didn't say always, but USUALLY) will have these items cleared before putting the property on the market.
Depends also if the auction is an absolute or has a reserve. An absolute is where you get the crazy prices that make the news.
What dpends on that?
In NJ, all Sheriffs auctions are absolute auctions. Whomever makes the highest bona fide offer at the auction wins the auction, no matter what they offer. Of course, as I said, the bank will almost always have a representative there, to bid until their magic number is reached. So, while it technically is an absolute auction it's unheard of for someone to get a property at Sheriffs auction for "**PENNIES ON THE DOLLAR**"
Depends also if the auction is an absolute or has a reserve. An absolute is where you get the crazy prices that make the news.
There is no reserve at a foreclosure sale. The property will be sold unless there NO bidders. That's why a bank representative is there. To bid in the bank minimum [or the amount of the debt depending on the requirements for deficiencies in various jurisdictions].
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Type of auction
