What Happens After a Sheriff's Auction Home Does Not Sell?
A sheriff's auction occurs when property is seized either as a result of criminal activity or unpaid taxes and fees. Although similar to a foreclosure sale, there are differences with a sheriff's sale. When a government agency, such as a county sheriff sells a property, there are no limits to the bid amounts. Sheriffs can set reserves (minimum bids) or allow a $1 million house to go for the $322 in unpaid property taxes. Although a sheriff's auction can be a great real estate bargain, it can also be completely unsuccessful if the property doesn't sell.
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Auction Terms
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A sheriff's department publishes the terms of the sale one day to a few weeks before the auctions. Auction announcements are published in the legal notices in newspapers and bulletin boards in county office buildings. Some sheriff's departments have mailing lists notifying regular participants of upcoming sales. Local ordinances dictate the auction schedule. Sales terms can include minimum bids, property sold "as is," or tax liabilities, such as attached liens and past-due tax charges.
Auction Format
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A sheriff's auction can be held several ways. The well-known method of an open room with bidders and an auctioneer is one method. Another type of auction is a sealed bid. Bidders have a certain time period to submit written bids in a sealed envelope. When the open bid time expires the bids are opened and the highest bid wins the auction. A more recent bid format is Internet online bidding. Bidders can bid more than once as the bid amount increases. The highest bid, when the auction concludes, wins.
Bidding is open to anyone who can verify the available funds to bid. Some will have cash, others will have signed letters of credit from their bank. Bidders can have credit lines available to close the sale immediately when bidding closes.
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Reserves
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Reserves are a leading reason sheriff's auctions are unsuccessful liquidating a property. If the property must receive a certain bid amount to cover all costs associated with the sale then a reserve amount must be met. If no bidder makes this bid amount when the auction is over then the property remains unsold.
After the Auction
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If the property does not sell at auction then the sheriff's department has two options: auction the home again with either the same or adjusted terms, or keep the house in inventory for later use or liquidation. If the sheriff is auctioning the property for a third party (bank, lien holder, other government agency) then the terms and conditions for attempting to sell the property again are determined for the repeat attempt. This process can involve lowering the reserve or lengthening the open auction to receive more bids.
If the house is kept then the possibility of accruing expenses to maintain the property becomes an issue; sheriffs are in the business of enforcing the law, not managing property.
Original Owners/Residents
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Depending on the jurisdiction and state law, the disposition of the owners or residents of the property can change after a sheriff's auction. If the auction fails to sell the house, the original tenants could possibly remain in the house. Also, if the auction fails to bring a sale, the original owners could be in a better position to negotiate settling the outstanding charges against the property with the agency owed. Finally, if the house is a seized property resulting from criminal activity and does not sell at auction, the sheriff has the option of retaining title to the property until such time as conditions improve for selling the house.
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References
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