You Won the Foreclosure Auction – This is What Happens Next
After winning a piece of real estate at a county foreclosure auction, a first-time buyer like you is probably wondering what’s next. You’re in luck! I’m here to take you through the first steps.
First Things First: Pay Your Balance
Before you think of doing anything else, pay the balance of your winning bid to the county court. A word of caution: If you fail to pay the balance of your bid within 24 hours of winning (unless it is a Friday, in which case you must pay the balance on the following Monday), then you’re out of luck. No amount of pleading will prevent you from losing your deposit.
Assuming you have followed the payment guidelines, you will have to wait ten days to receive a certificate of sale from the county. Only then are you legally allowed to gain entry to and start work on the property that you have successfully bid on at the county foreclosure auction.
Haven’t Received Your Certificate of Sale?
Every once in a while, the certificate of sale does not arrive either by email or mail due to an objection or redemption just before the foreclosure auction.
This usually means something happened late on the previous day or the morning of the foreclosure auction that did not have time to be recorded at the county court, which would have canceled the sale. The foreclosure auction went ahead in ignorance of very recent events.
What could have happened, you ask? Some examples include the lender agreeing to a modified loan to the mortgagor or the defendant issuing a motion at the county court suggesting their probable bankruptcy, a well-known delaying tactic that buys the debtor more time to fight for their home.
Judges hate these situations, but the statute pertaining to them is very rigid. The judiciary usually has no option other than to grant a stay of execution or, in this case, foreclosure sale.
Yes, You Can Lose Your Win from the County Foreclosure Auction
Occasionally the mortgagor finds a way to clear their indebtedness and get back on schedule or even remove the entire debt.
You should receive a notification email within seven days of your winning bid notifying you of any of the above circumstances.
To be honest, the soft side of me — and yes, there is one — always finds an element of joy in this. It’s emotional when the underdog comes through at the very end. C’mon, everyone likes a happy ending occasionally! It’s not all about the money.
In any event, if this happens to you, don’t worry; you will get every penny of your deposit and balance monies back from the county, usually within ten to fifteen working days.
After this happened to me five years ago, I got into the habit of visiting the county court online document search and checking the last docket recorded after winning a property at the county foreclosure auction. You simply put the case number into the document search and review the last activity related to the case number, which is hopefully the notarization of your winning bid.
Time to Get Your New Property in Order
When you successfully win a tax deed property at the county foreclosure auction, you immediately receive the tax deed, which allows you instant possession of the real estate you have just won.
There are a few specific requirements you need to know, including the need to promptly start a quiet title action. This will cost you approximately $1,500 to $3,500 depending on the attorney, property value, and complexities of the case, plus two months of time if no objections are received.
A quiet title action is a circuit court action or lawsuit that lets a future buyer know you have contacted every previously recorded owner on the title of the property you have just acquired and notified them that you are the new legal owner.
Any objections to the title being vested in your name or selected entity should be made at this point. Failure to make such a claim results in a judgment in your favor, and you will be able to receive title insurance so you can convey your property to a future buyer.
In 99.9% of cases, a judgment in a quiet title action is absolute, but there’s a slight chance that your situation will turn out different. I urge you to check with a property attorney to make sure your quiet title action judgment is sacrosanct within the jurisdiction of the real estate location.
When you win a foreclosure property, you will receive a certificate of title from the municipality where you gained the property within approximately ten days following the certificate of sale.
A certificate of title is the instrument from the municipality letting everybody know you are the legal owner; however, it does not guarantee that the real estate is free of all encumbrances. In a typical transaction, you would give your seller a warranty deed that says you warrant that your property is free and clear of all encumbrances AND show title insurance guaranteeing this!
Remove Any Occupants from Your Property
The following applies to both tax deed and foreclosure properties.
A practice I regularly employ, even if there is no sign of occupancy, is to put an eviction notice on the front door of the property the moment I receive the certificate of title. I also send a recorded delivery letter to the address informing the known or unknown occupier that I am the legal owner and am issuing a three-day notice to quit the property. This may seem like overkill, but it’s in your best interest to cover all of your bases.
If the property is occupied, you will file an unlawful detainer lawsuit with the county court three days after posting the eviction notice. This lawsuit gives the occupant five days from the day they were served to file a response in court.
Usually, the county clerk’s office schedules a trial within 20 days, and at the trial, the judge will order the eviction of the occupier(s) from the property. This will give the occupier(s) five days to vacate or, alternatively, trash and/or remove all of the copper piping and wiring from the premises before you and the sheriff’s department arrive to remove them and change the locks. True story.
On one occasion I entered a foreclosed house that I had won in auction. I discovered it was missing a complete kitchen and appliances, and the bathrooms didn’t have toilets and sinks! Every light fixture and fitting was gone, and there were holes in the wall where the plumbing belonged.
The newly evicted occupiers were outside filling a truck with their belongings. I called out, “Hey, I would have paid you for demoing this property. It saved me a fortune.” They looked at me incredulously, and one of them asked if I would pay them to continue!
They were tenants of the previous owner, and I had offered them $500 to move out within ten days of me receiving the certificate of title and leave the place intact; they figured there was more money in stripping the place, apparently.
I wanted to tell them “to go forth and multiply” in a shorter phrase than I am allowed to publish on this website. This situation is extremely frustrating, and I highly recommend avoiding it. On reflection, I should have offered more money.
You can find several articles on PropertyOnion.com regarding evictions and the process, but let me say here and now that it is best if you can convince the occupier to vacate the property in good condition in an acceptable time frame with the incentive of a cash payment. This is commonly known in the trade as “cash for keys.” Anything that helps you avoid the long, drawn-out judicial process that keeps you from getting into the property you gleefully won at auction is worth the effort.
If you have not purchased an occupied property at a county foreclosure auction before, all of this can seem quite daunting. However, sticking to the well-trodden guidelines which I am describing will help you enjoy a successful outcome.
Beef Up Your Unoccupied Property’s Protection
If you scouted the property before the auction and discovered that it was unoccupied, then I suggest — after making doubly sure there are still no inhabitants — entering your newly acquired property, immediately changing all of the locks, and securing the ingresses and egresses to the premises.
Depending on the value of the property and the type of work you intend to do, a chain link fence is also a great option; they are not expensive compared to what can happen when you or your team are not on site.
In the trunk of my car, I keep corrugated cardboard signs with my company logo (can also be purchased at Home Depot without a logo) that read “No Trespassing” or “Trespassers Will Be Prosecuted” and “Property Surveillance In Force.” They are placed strategically around the property.
The signs do have a proven effect; while they won’t stop the most desperate individuals from reentering the property, anyone with doubts may hestitate. Burglary is a felony, and breaking and entering is a misdemeanor — both carry jail sentences.
Some people may be shocked at this approach. I think that if there is no sign of anybody living in the house, there is no reason not to take this course of action. But don’t take my word for it: Consult a property attorney before AND NOT AFTER taking any of these actions.
Stay Tuned for the Best Real Estate Tips Around
As you continue your real estate journey, you’ll surely have more questions. I have answers! Next month I will give you some practical tips concerning the decisions that need to be made before undertaking any work on the real estate you have won at the county foreclosure auction.