Buying a homestead from a sheriff's sale
The
Homestead That Got Away had been sold less than a
year ago at a sheriff's sale...which got me wondering if I should
peruse those listings in addition to craigslist and real estate sites.
Sure enough, I found a potential homestead on a county website in short
order. But was it worth it?
After intensive research, I found out why the
average homebuyer probably shouldn't stalk sheriff's sales. These
auctions are a way for a bank to recoup their investment after a
foreclosure...but lenders don't let properties go for a song. Instead,
in 80% of sales, the bank buys the property back rather than losing
money on the endeavor.
The next hurdle to be
aware of is additional mortgages. This was the point that killed our
interest in The Homestead We Threw Back, since an online title
search suggested that the mortgage resulting in the foreclosure
wasn't the only lien against the property. If we'd bought that property
without a title search, we would have owned the land...plus the
obligation to repay the primary loan. Suddenly the selling price got a
lot higher than we thought!
Of course, it can also
be tough to thoroughly research foreclosed properties since the current
owner might not be thrilled about you tromping across their land. Given
the the high risk involved in buying a pig in a poke, we're probably
going to steer clear of this source of bargain real estate for
now...although we will check the bank sites in a month or two since
foreclosed properties often end up there for less than they went for at
the sheriff's auction.
Back to the drawing
board!
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About us: Anna Hess and Mark Hamilton spent over a decade living self-sufficiently in the mountains of Virginia before moving north to start over from scratch in the foothills of Ohio. They've experimented with permaculture, no-till gardening, trailersteading, home-based microbusinesses and much more, writing about their adventures in both blogs and books.
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I worked for a few years with a real estate attorney in TN and learned quite a bit out foreclosures and Sheriff's sales. I would caution you about buying property from Sheriff's sales which are being sold for back taxes. In TN (I don't know about other states but it's probably true for them as well), a homeowner whose property is being sold for back taxes has one year after the sale to pay the county for the back taxes which will make the sale to anyone else void.
You might be able to get a piece of property direct from an owner, but I would strongly recommend you get a title search done by a professional, NOT just online because many times there are niggling little details that are not noted in those online searches, like easements, oil and mineral rights, where the property lines really are (mistakes in land descriptions happen!) etc. which will only show up if you actually look at the deeds in question.