About a week ago, my cousin was visiting and tagged along with me to a real estate Sheriff Sale in DuPage County, Illinois. He had so many questions that made me reminisce on my very first auction experience and reminded me how little the public actually knows about the amazing investment opportunities you can find at a Sheriff Sale auction. So join me on a quick trip down memory lane and learn about some important facts I've picked up along the way.
I always get asked the question, “what's it really like at a real estate foreclosure auction? Is it intimidating? Are there are a lot of competitive investors battling? Is it even legal?”.
I had the exact same questions right before I stepped into the auction room – which is located at the county courthouse and the bidding process is overseen by the Sheriff's department, so yes! It is absolutely legal!
Properties being auctioned off are basically at the end stage of being owned by the current homeowners that have defaulted on their mortgage, and the auction itself determines whether it gets sold to a third-party investor or it goes back to the bank (REO or also know as bank owned properties). If a property goes back to the bank, then it is properly foreclosed on and eventually the bank will put it on the market. Because of this, if you happened to miss the auction for a property you wanted to invest in, you have missed the opportunity to purchase the property at a predetermined court sanctioned auction price. What I mean by this is that often times if the property does not sell at the Sheriff's auction (the property goes REO), the bank can go through a third-party “auction” (for example, auction.com) and you can still buy it there. While they may set the starting bid price to be the same as the Sheriff's sale, these auction websites are notorious for turning around and trying to negotiate a higher price for their client – which just so happens to be the bank.
Since the Sheriff Sale auction system works in this way, it is definitely quite competitive and because it involves large amounts of money (it is real estate, after all) it can get a little intimidating. I remember ат my first auction, I was most surprised by the number of properties one person would bid on. I was confused as to how someone can walk away from the auction with three or four new properties – all paid in cash within 24 hours. That's when I realized how much of an untapped investment market these Sheriff Sales really were, and how these investors were definitely banking on that fact.
What's it really like at these auctions? On a scale of Storage Wars locker auctions and Christie's Leonardo da Vinci auctions, I would say the Sheriff Sales auctions fall pretty much right in between the two – but can definitely be swayed to either side in an instant. Storage Wars auctions are essentially blind bidding. It makes for great reality TV, but nothing else and is of course, never recommended. Many people get spooked about foreclosure auctions because they falsely believe the real estate auctions are blind too since you can't go inside the house. This is absolutely not the case! With the correct, precise, updated, and reliable information about a property from a local professional source, it's actually more like Christie's da Vinci auctions where the artwork is not publicly displayed live at auction, but is definitely vetted, appraised, and checked for authenticity. Do investors consider Christie's auctions blind bidding? Of course not! Sheriff Sale auctions follow the same principle.
This is why well researched, current, and hyper-local data is the key to making good investments and being successful in the foreclosure properties investment markets. In fact, right before the start of any sale, the Sheriff Department's auctioneer will always remind people to make sure they understand exactly what is happening, be certain of the title for the property they want to purchase, and recommend seeking professional specialized foreclosure real estate guidance.
For more information on bidding ot foreclosure auctions please contact us.