Are you interested in adding real property to your 2016 portfolio before the year ends? If you have ever been curious about buying foreclosure property and potentially getting a steal, here is a general run down of the procedure and some helpful tips to get you the best deal. Here is the Sale Procedure:
1. Finding foreclosure properties to buy
• Posting Board: In each county courthouse, there is a posting board where all sales must be posted for at least 21 days. Ask courthouse staff where the board is located. The posting will also have pertinent information about the sale, including date and time, rules of the sale, etc.
• Trustee/Law Firm website: The seller/trustee will typically have the properties listed on their website. This is usually an easier way to sort through properties faster and get more information, such as opening bid amounts. If you happen to be interested in one of our properties, Hutchens Law Firm listings are located on our Foreclosure Sales page.
• Third Party Sellers: Other companies will sometimes assist with foreclosure sales. For example, Auction.com sells foreclosure properties in North Carolina.
• How much is the opening bid? The opening bid is set by the foreclosing mortgage company and is typically posted on the website the week prior to the sale. However, sometimes it can be the same day or even hours or minutes prior to the sale. Note that you cannot bid before the sale begins.
2. What to expect the day of the sale
• When/Where? The sale will occur at the county courthouse where the property is located. Typically, sales are held on the front steps of the courthouse, however, check with a deputy or a clerk in the special proceedings office as there can be another designated area in the courthouse for sales.
• Will the sale start on time? The seller/trustee has one hour from the time listed on the posting to sell the property or to postpone it to another day.
• What happens at the sale? The seller will conduct the sale by reading the entirety of the posting, which includes the property location, rules of the sale, and that the property is being sold “as is.” The sale will start with an opening bid from the foreclosing mortgage company, then you and other bidders will then increase the bid amount until the bidding ceases. You cannot bid less than the opening bid amount, and you must be present at the auction, as you cannot bid over the phone.
3. You WON! Now what?
• The seller/trustee will need your information for the Report of Sale, including the name you will want listed on the deed, your address, and your contact information (for upset bid purposes). You will also have to remit to the seller/trustee a certified check (no personal checks) made out to the seller/trustee’s office (i.e., made out to “Hutchens Law Firm”) for five percent of the purchase price or $750.00, whichever is greater (e.g., if your high bid is $100,000.00, then you will have to pay $5,000.00 at the sale).
• To ensure you have the proper deposit amount with you, bring a certified check of five percent of the highest bid that you are willing to pay, or bring several certified checks in increment amounts, such as $1,000.00.
• How is it reported? The Report of Sale, filed out by the seller/trustee at the sale, is filed at the clerk’s office immediately after the above has been completed.
4. That’s it? Not quite.
• Once the property is purchased at the sale, this starts the upset bid period. The upset bid period runs for ten days. This means anyone can upset your bid by filing an upset bid at the clerk’s office1. The upset bid must increase the previous bid by a minimum of 5% (e.g., if your bid was $100,000.00, the upset bidder would have to bid at least $105,000.00). The upset bidder would also have to pay the clerk five percent of their new bid2.
• When is it mine? Once an upset bid is made, the ten days starts again. Iif you still want the property, you can now upset the previous bid the same way3. The bidding war continues until there have been ten days without new bids4.
• You won! Now the seller/trustee will contact you to complete the sale and get the full purchase/bid amount in certified funds.
• When do I need to have all the funds? Generally, this amount is due to the seller/trustee within 30 to 45 days. You will also want to hire a closing attorney to assist with the closing details.
• What if I default? If you cannot get your funds together, the property will be re-posted and re-sold, and it is likely that you will lose your deposit to cover these costs.
6. Trustee’s Deed
• Here is my money, can I have my new house? Once your certified funds have been confirmed, a trustee’s deed will be drafted and sent to either you or your closing attorney5. You schedule your closing and your closing attorney will help you with closing documents and record the trustee’s deed during the closing. A final Report and Accounting will be sent to the clerk’s office to complete the foreclosure file.
7. Things to Consider When Buying a Foreclosure Property
• Hire an attorney. I know, big surprise for an attorney to suggest this. However, an attorney can assist you in getting a title search and conducting your closing.
• Title search. There may be superior liens, mortgages, taxes, or other encumbrances on the title to the foreclosure property. This means you could buy a property and then you are responsible for other loans, taxes6, or HOA fees. You will want to know whether or not the title will be free and clear before you purchase. Remember, you cannot go onto the property.
• Secure a loan. If you do not have a big pot of gold lying around, you will want to speak to your bank or other lending agency about securing a loan for the property. The seller/trustee’s office cannot help you with financing. Even though you do not have to present any proof of funds at the sale, it is still important to get this ball rolling.
• Research yourself. Since you are buying the property “as is,” it is smart to conduct your own research. Some suggestions are looking at the online property tax records for property value, driving by the property, and googling the property address for news about anything that may have happened at the property.
• When can I get the keys? You will have to hire a locksmith or cut off the lock box once the property is yours and is vacant.
• Eviction. If there are persons living on the property, you must take the legal steps necessary to evict them after the Trustee’s Deed is recorded and the Final Report and Accounting is filed and before you can enter the property. You should consult with a lawyer about this process.
1This also means, if you missed the sale, you still may be able to purchase the property.
2Call the clerk’s office to see to whom the check should be made payable.
3If the 10th day falls on a weekend or holiday, the upset bid period will extend to the next business day.
4If your bid is upset, your money will be returned to you. Speed of the return will depend on the county and to whom the money was paid.
5If you have a closing attorney, the trustee’s deed may be sent to them ahead of time and held in trust. This means you may be able to close on your new property the day you send in or drop off the funds.
6Taxes due are NOT prorated. Therefore, if you buy the property in November of 2016, and the 2016 taxes have not been paid, you will have to pay the entire amount, not just for the months of November and December.
Published by Shiann Schmidt on February 15, 2017