In Minnesota, we have a fairly involved foreclosure process. After a sheriff’s sale, the owners has 180 days to redeem the property, and prevent the property from returning to the lien-holder. This was my first sheriffs sale purchase, and my sixth investment property purchase.
I had a friend that was a gambler. He wasn’t a great gambler, and he wasn’t rich enough to even be a small gambler. I used him for some handyman services over the years, as he was a solid worker and could get a lot of items done. He could paint, fix things, roof, basically everything.
One day he came to me looking for $10K. While I had had the money, I was not about to send it into never, never land. I told him I really didn’t have that kind of money sitting around.
He explained to me his house was in foreclosure and he need money to get it out. He was attempting to refinance, but with a credit score in the 500s, it was difficult, even back in the liar loan days. His attempt to get refinanced was declined.
So I did some checking on how foreclosures work, and specifically how this one would work. The sheriff’s sale price was ~$51,700. Not too much, but not something I want to lose.
I was able to contact the lender who he was attempting to refinance. The lender sent me the appraisal, which showed it was valued at ~$160K. A one acre home, on a lake. That’s a pretty good spread, over $100K.
I decided to go for it. I was not going to tell him, as he would have wanted the $10K instead. The property was about a 4 hour drive from my house. I had never been in the property, but I saw some pictures. I drove by it, it wasn’t too bad. I picked up a hotel room, in anticipation of going to the sheriff’s office in the morning.
So there I was. I had a $50K cashier’s check, and 7 additional $1K cashier’s checks. I wasn’t exactly sure how much I needed, so I had a large ‘bill’, and change.
My building was maybe the 5th or 6th building auctioned. It was a low-key affair. Just at the sheriff’s admin desk, me and the bank’s lawyer. The woman at the sheriff’s desk asked for an opening bid. The attorney said a number like $51,753.14, which was the exact amount owed. She looked at me, and at that point, I was still thinking about backing out, but I said, How about a penny more.
The attorney said, “I am out”, as he only needed the money required by the bank, not a penny more. I paid with my cashier’s checks, and got the rest of the ‘change’ in a check a week or so later.
I had to wait six months for the property to be mine, and the redemption period to expire. I called my friend, and his wife was mad I bought it, rather than loan the money. The way I did it, I had title to the property. If I gave a loan I would have had nothing but a piece of worthless paper.
The property was eventually redeemed and I was refunded all of my money along with 10.5% interest, which was the interest on the underlying loan.
So, I gained a LOT of experience. I got over the hump of spending cash money for a property. I was rewarded with 10.5% interest, which wasn’t too bad.
Have you ever bought a property at a sheriff’s sale? Or ever bought a foreclosure?