by Les Scammell

Created on: December 09, 2010   Last Updated: December 13, 2010

Buying a home at a sheriff's auction can be a tricky affair and it's certainly not advisable for the faint of heart. For those that do the research and attend an auction prepared, the rewards can be substantial. Homes sold through a sheriff's auction are generally well below market value with most savings in the 15%-30% region. It is not unheard of for homes to sell with much higher margins, however, you do need to be careful.

To be successful at a sheriff's auction, you need to be prepared. In most cases you will not be able to view the property, but that doesn't mean you can't do a walk or drive by to view the property from the outside. You can also gain a good indication of the suburb while you are at it.

When buying at a sheriff's auction, you will typically need to place a 20% deposit on the home at the fall of the hammer - in other words, as soon as the auction has finished. You generally need to pay the balance within 30 days. It is difficult to finance these properties through standard mortgages unless you have other properties to use as surety. If you do, then gain pre-approval before the auction.

Set yourself a limit, for example, $150,000. This means you will need a maximum deposit of $30,000 in either cash or cashier's check. Your best approach is to buy cashier's check in a range of values - in this case, $15,000 + $5,000 + 10 x $1,000. This will cover most deposit requirements up to your limit.

Before buying at a sheriff's auction, check to see what outstanding taxes are payable. If you are successful, you will also need to pay these taxes to gain clear title. While checking for back taxes, do a title search through the county clerks office to ensure there are no other liens on the property.

One tip that is well worth making note of relates to the current occupants of the home. If the home is occupied then you may have to go through eviction processes to remove the residents. It is often wiser to purchase homes that unoccupied at the time of the auction. It is also a good idea to have all locks changed as soon as you take possession.  In most states, the mortgagee has the right to redeem the property within a set number of days following the sheriff's auction. Check with the county clerks office to determine what the situation is in your county.

Buying a home through a sheriff's auction is fraught with danger. However, if you do a title check, undertake an external inspection, and have your finances all prepared, you can buy quality homes well below the current market value. Fail to prepare well and you could find the experience one that is costly and demoralizing.

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