Real Estate Investing: Sheriff's Auctions

Public Auctions or Sheriff’s Auctions are not for the novice real estate investor. Generally they are the most risky time to purchase foreclosed property. This is not to say that they can’t be an overwhelming profit center. There is no doubt that auctions can yield major returns.

What happens at an auction is generally very similar in all states. Some states will auction the property in a courtroom and others will literally auction the property on the courthouse steps.

At an auction there will typically be a referee who handles the bidding. Most likely there will be a representative from the bank that is foreclosing, and there will be some investors present, and others just interested in what is happening.

The bidding at an auction will start at whatever is owed to the bank, plus legal fees. Like preforeclosures, auctions are a good time to buy property at below market value. Buying below market value will give you equity. I have seen properties sell for half price at auctions!

You can find great deals at auctions, but there are also many pitfalls, particularly for novice investors. One major obstacle with auctions is you generally need to pay cash, on the spot, for the property. This alone eliminates 95% of people from buying at auction.

Another drawback to auctions is that the homeowner is given a redemption period. Typically, the redemption period is six to twelve months. From the time the house sells at auction, the homeowner has the right to buy it back for what it sold for plus interest. This means you could buy a house at auction and might have to sell it back to the original owner during the redemption period. Additionally, if the homeowner does not move out at the end of the redemption period, it becomes your responsibility to remove the tenant through the eviction process.

Public auctions are very easy to find. Just call your local county assessor’s office and ask whom you need to speak to regarding sheriff’s auctions.

Jeffrey Ringold is the author of "How To Build A Massive Fortune Through Real Estate Foreclosures." He is a licensed real estate agent and investor who has bought or sold over $12 million in real estate over his 7 year career. He is consulted by leading real estate developers and investors almost daily.