As we have talked about many times in the past, we have never had much luck buying property at Sheriff’s sale because the investor / bank generally comes in and bids the property up past the point where a purchase for us makes sense. I still don’t understand the rationale for this process but I believe it has to do with when the investor/bank chooses to show a loss on their books.
The cost of running many of these properties through the REO process is very high and it often seems that the bank would be better off taking their hit up front. However, I am not complaining, we have made a lot of money on REO properties over the years.
In some instances however, rationality may be slowly creeping into the process, to the chagrin of property owners, municipalities, and ultimately investors. A March 30, 2009 article in the New York Times entitled “Banks Starting to Walk Away on Foreclosures” describes a situation in South Bend, Indiana, where the bank walked away from a property already scheduled for sheriff sale.
This action has left the city to clean up the mess and the homeowner to foot the bill. In this case, the owner had already suffered the pre-foreclosure process and thought the episode was behind her when the sheriff’s sale was cancelled at the last minute. She still owns the house but owes the city money for maintaining it and ultimately demolishing it.
According to the article, this is happening all over the country. How is this potentially good for the savvy investor? Strictly speaking it is not because if the sheriff’s sale is canceled, nobody is going to buy the property. So the question remains, why do we continue to go to sheriff’s sale almost every Friday morning?
In Springfield, Ohio, where we live and work, one of my partners recently picked up a house at sheriff’s sale and it was a surprisingly good deal. A fluke? Maybe. However, Brad reported last week that a handful of properties went to sale and the banks did not show up to bid the property up as they normally do. This of course made it possible for an investor to make a purchase at a reasonable price. Why didn’t the banks show up? We have no idea.
So much about this foreclosure crisis is changing daily. It is almost impossible to keep up. But just when we thought it was time to formally take sheriff sale due diligence off of our weekly to-do lists, we see reason to continue following the process.
What are you seeing where you are? We would love to hear from you. Check us out today at www.MyRealEstateLifeOnline.com.