Ohio foreclosure auction questions? - Posted by Del-Ohio

Posted by JT-IN on October 15, 2003 at 23:37:48:

Dell:

In the example that you give, with the 1st @ 100K, and the 2nd @ 20K… when the 1st stops bidding @ 100K, (usually they will bid to the point, in addition to judgment amount, that will cover Clerk of Court Costs… Sheriff’s poundage, and any outstanding taxes that they must pay… plus accumulated interest from the date of judgment)… let’s say that this totals 110K eve… the Jr mtg can bid just the same as any other investor can… such as, 110,100… If they prevail then they will post that bid amount in cash, just like anyone else would.

Let’s say that the 2nd then sells the property for 95K, then they can file and receive a deficiency judgment agaisnt the Debtor, equalling their loss… (assuming there has no Bk filed).

Many times 2nds will file an answer and not bid… Also many times they will not even file an answer, nor bid… they just forget it when the FC is filed. This is where you will find some equity in these deals, when there is really no equity, but the 2nd doesn’t show up to portect themselves…and the 1st is satisfied by the 2/3rd bid or less… These are your best deals… and after some experience you can essentially know who will and who usually doesn’t defend their 2nd mtg’s… Bank One, (being a huge lender of Jr mtg’s), usually does bid on most of theirs, unless there has been a Bk field by the Debtor… If have seen many large Banks walk away from large 2nd’s, some exceeding 100K on properties… and to this I say… let’s have a toast… I love it when that happens.

Down time is critical… Hope you have a terrific time at the lake… Maybe, just maybe I will take you up on the night in the Cabin… That sounds great to me… Have fun.

JT-IN

Ohio foreclosure auction questions? - Posted by Del-Ohio

Posted by Del-Ohio on October 12, 2003 at 21:33:58:

I am used to the rehab market, but just started looking at the forclosure auctions upon the insistence of a friend.

We pulled comps on five propertied that were going to be auctioned, went and looked at them, then attented the auction to get a feel for it. From first appearances this looks like a very lucrative market. I am due diligence before we buy.

I have been searching posts and checking other sources but there seems to be conflicting information.

If anyone can shed some light it would be appreciated.

  1. At the local auction the poperties being forclosed on have an appraised price and an opening bid price. The opening bid is 2/3 or appraised price. Does this mean the mortgage holder has agreed to sell at this price?

  2. Is there a way for me to know if the bank is bidding on the property?

  3. If I am the high bidder, am I buying the property at the price it is being auctioned or can other liens follow the property. An article by Bronchick says – remember all junior liens including tenancies, are wiped out by foreclosure. But another article I read mentioned that tax liens and IRS Liens may still be “attached”. What can follow the property in a forecloseure?

  4. Any references, articles, books you can reccomend on buying at auction, specifically for Ohio? I understaqnd all states have their own variation to the law.

Any help would be greatly appreciated.

Del-Ohio

Re: Ohio foreclosure auction questions? - Posted by Tim- chi.

Posted by Tim- chi. on October 13, 2003 at 13:35:26:

Del,

You may want to check Ohio continuing legal education-they will likely have books/seminars etc. for real estate law in general and foreclosures in particluar. You do not need to be an attorney to order products.

When buying at auction you need to know what liens attach. As another poster mentioned IRS has a 120-day redemption period. It will be very difficult to get financing even from an HML until the redemption period expires. This is only an issue if you’re planning on refinancing to pull-out your cash.

One thought- if you order a title search (or do it on your own) be sure to look for IRS liens as they often do not appear when you search the PIN- you need to search for the lien by looking for the owners name/ss# as the IRS files liens with the county where the taxpayer(s) live.

Good luck.

Tim Foley

Re: Ohio foreclosure auction questions? - Posted by E.Eka

Posted by E.Eka on October 13, 2003 at 09:45:51:

Regarding liens, I think both are correct. All liens, excluding tax and government liens may by wiped out by foreclosure.

Re: Ohio foreclosure auction questions? - Posted by JT-IN

Posted by JT-IN on October 13, 2003 at 08:52:17:

Dell:

Ohio state foreclosure law stipulates that the Sheriff will provide 3 independent Appraisers to render an opinion of value; Appraisal. The Lender is NOT consulted on that figure, nor have they consented to anything as a result of the Appraisal. This number simply establishes the minimum bid, which is as you say, 2/3rd of the appr.

There are ways to analyze the court records and make a determination, (an educated guess) of whether the Lender will bid, and how much they intend to bid. This is not scientific and is only a yardstick, but I can determine with usually 99% accuracy where the Bank will bid to… There are simply trends or traits in which they follow. Different Lenders have different traits as well, and experience tells you their habits, for the most part.

IRS liens do have a Redemption Period of 120 days in hio; (this period can vary longer in other states, which is effected by each states specific redemption period). You can read more about that redemption period at the link below:

http://www4.law.cornell.edu/uscode/28/2410.html

You might consider checking with the local Bar Assn, to see if they have any upcoming seminars, which can be attended by non-lawyers too. Other education that will be helpful here is info on BK filings, as this greatly effects the foreclosure process.

Best advice is to attend as many auctions as you can, and become a good student of what you see… then try to understand why you saw that… I am basically self-taught on the foreclosure subject, as I have been buying at Ohio foreclosure auctions for 4 years now… but I still learn something new, now and then… There is much to know on the subject, and it is not something that you will pick up over a few posts here or elsewhere…

What I suggest is that you select 5, 10 or 50 upcoming cases, depending upon how many cases you feel comfortable in tracking… Maybe 10 per week, or so. Follow those cases from the time of the first advertisement, which is about 6 to 8 weeks prior to the scheduled Sheriff Sale. Go to the Clerk’s Office and physically pull the file. Do the following:

  1. Read the Complaint for Foreclosure
    This document will list the Plaintiff’s Name; (the Lender who is owed the debt), the Attorney, the Debtor, any other party who has an interest in the property, such as a Jr mtg… They will also be named as a Defendent. This provides them notice in order to protect their equity interest in the property, should they desire to do so.

  2. You see that each party holding an interest in the property, (Owner, Treasurer who may be owed taxes, any other Lenders, any other party with a Lien against the Debtor), will be served Notice of the suit, usually via Certified Mail.

  3. You will notice either the Return Receipt signed and returned, (green card), or the original mailing piece returned “undeliverable”. When this happens, it means that Notice was NOT received, other tahn via the advertisement. It is preferred that each party holding an interest be physically served, but not absolutely necessary.

  4. You will see answeres filed by some Defendents… The Treasurer will usually file an answer, some Jr. Lenders will file an answer, and some will even file a “Cross-Claim” to the complaint. When they file a C-C, this usually indicates that they will “defend their position”. which means Bid at the sale. They are usually pretty serious about doing so when a C-C is filed… This filing gives them a greater standing in the case too.

  5. After the elapse of 60 to 90 days following Notice to Defendents, and responses, then a Motion for Summary Judgment will be filed. Sometimes if the Debtor hasn’t filed an answer, which is usually the case, the Plaintiff will filed for a Default Judgment. Once the Judgment is rendered, then the remedy to collect the judgment is that the court will order the Sheriff to Sell the asset… (Sheriff Sale).

  6. The Plaintiff will file a Praecipe, along with $ 550.00; (this amount may very in your county), which then requests the Sheriff to start the appraisal process and shedule the property for sale… (It would be at thsi point that you will see the ads to start for 5 consecutive weeks, advertising the sale, following receipt of the appraisals). This is when you should select the cases to follow from this point out, watching see how many make it to sale… what the Lender does, as to bidding, etc.

  7. As you repeatedly evaluate these complaints, lenders, attys, you will begon to see the characteristics and triats that will allow you to pinpoint the occasional equity-rich property coming up for Sheriff Sale…

As you stated: “From first appearances this looks like a very lucrative market”… Yes, it can be. This is almost exclusively how I make RE purchases, and the more study that you do to understand the process, the luckier you get at finding those lucrative properties. It pays to understand what, why and how all this works… Of course, the average invgestor at Sheriff Sale couldn’t begin to tell you what is happening other than the person in the front of the room is the auctioneer (sheriff)… It is rather easy to out class the competition there…

Wish the best journey on the foreclosure education train…

JT-IN

Re: Ohio foreclosure auction questions? - Posted by Kim

Posted by Kim on October 12, 2003 at 23:55:01:

Hi Del,

I’ll try to answer as much as I can. JT-IN would be the best person to answer your questions.

  1. No, mortgage holder wants as much as possible for property, the bidding simply starts at 2/3 of appraised value.

  2. Yes, get to know which attorney represents which lenders and see if the attorney bids. Usually the bank has a representative at the auction to bid for the property. However they are rare occasions where the lender forgets to have representation at the auction.

  3. Yes there can be other liens that follow the property like IRS liens and if a lien holder was not notified of the sale they could have recourse. It is recommended that you learn how to do a title search and that YOU do one for every property you want to bid on.

  4. I can’t recommend any reading specifically for the state of Ohio, it’s a learning process and has pitfalls.

  5. You failed to raise the question of right of redemption which in Ohio is customarily until confirmation of sale, usually 30 days.

If I have gotten any of this wrong I hope JT-IN will chime in and set us both straight.

HTH

In this day and age of sloppy title work - Posted by JT-IN

Posted by JT-IN on October 13, 2003 at 14:28:43:

There are title companies out there doing title searches who don’t even know that IRS has a redemption period… Even had this dame discussion with a Title Atty once, and who said… "I’m not sure about those… " I have had IRS liens on propery bought at Sheriff Sale, and financed the property immediately following receipt of the Deed. Of course this is likely a rarity, but just to illustrate the point… not all title companies even know this… and best not to point it out to them either…

JT-IN

Re: Ohio foreclosure auction questions? - Posted by Del-Ohio

Posted by Del-Ohio on October 13, 2003 at 21:46:58:

Thank You for the dissertation on foreclosures, you obviously have a lot of expertise in this area, your time and help is greatly appreciated.

Last week we looked at properties that were scheduled for forclosure, with comps in hand, to determine what we considerd FMV, then we attented the auction.

Half of the properties sold for opening bid price, on the drive home we are commenting on the condition of these properties compared to what we are used to rehabbing. Most of the forclosure properties were in solid neighborhoods and the properties were in decent condition, needing maybe some paint, new carpeting and a few minor repairs and cleanup.

We started thinking Geez seems like there are plenty of properties that have 10,000 to 30,000 equity being sold every week. Then we started thinking, Ok there is a thirty day redemption period. We could have the clean up one and be ready to go to market in 30 days. Hmmm if we can do 24 rehabs a year, we could do 48 or these a year. Hmmm maybe we could do double that … we run some numbers and the adrenaline starts pumping.

In the back of my mind sits this, Del you are misisng something here, it cant be this easy, learn the system start slowly, ask questions keep your eyes open and learn the process. There is plenty of time, if this pans out to be half as good as it looks.

Minimum Bid; I wondered about this, because I found it “amazing” that over half of the properties sold at opening bid. Is this normal in your area? I will be back there again next Monday, see if it was a fluke here. Would you suspect liens on these properties?

Do you rely on the appraisal? Or do you run your own comps?

Your step by step explaination of the process is extremely helpful and greatly appreciated. I will pull five cases I want to track and follow them through the process to start with and see how this goes. I will let you know what I run into.

I ran across this website,http://www.webtoolset.net/ta/ looks like a good way to learn how to do my own title search.
Unless someone suggests a better route I am going to order this to learn the details of doing a title search.

You mentioned that you have purchased properties with an IRS tax lien, how likely is it that the IRS will exercise right to redemotion?

What would happen if thy did? Would they pay you back for what you paid for it, would they auction it off again?

With property tax liens, what is the likelyhood of redemption?

Thank you again for your detailed explaination I will put it to good use.

Del-Ohio

You give and you give and you give - Posted by rm

Posted by rm on October 13, 2003 at 09:56:33:

You’re a good guy.

Re: Ohio foreclosure auction questions? - Posted by Jon Morgan

Posted by Jon Morgan on October 13, 2003 at 20:53:26:

Ohio is a strick foreclosure state. Dont be confused my the confirmation of sale, when it comes to redemption. IN most counties of Ohio, the confirmation can take anywhere from 3 weeks to 2 months. Don’t believe that you will get the deed right away either. I have heard horror stores where lendors and county offices are taking up to 8 months to get you a Sherrifs deed. That is crazy.

Each county in Ohio has some different laws. The best thing to do is to focus on your particular county, before venturing to other sales. You will become familiar with the bidding by the different reps from the banks. Pay close attention to their tactics. Some of them play hard ball with the other bidders and some just stick to their bid sheets. Dont get caught up in the excitment of the bidding process. Make sure that you are driving by each property before purchase and taking a really good look at it. You can imagine that most will need at least carpet and paint at a bare minimuim. Depending on your market and the house, you can automatically add in at least 5-15k in fix up.

Dont worry about Federal Tax liens on houses built before the 1970s. It is highly unlikely that the IRS would be interested in redeeming, due to lead paint issues.

Re: Ohio foreclosure auction questions? - Posted by Del-Ohio

Posted by Del-Ohio on October 13, 2003 at 20:22:34:

Thank you for the excellent information. I greatly appreciate your response.

Right of redemption; I had not asked about it because it was the one aspect of foreclosures I was relatively certain about.

Title searches; I will have to get trained myself, I was going to ask my attorney for the fundementals, then I ran across this web site http://www.webtoolset.net/ta/ looks pretty good.

Unless someone gives me a better idea about how to learn it myself, in the next couple days, I will buy this course.

We ran comps on 12 properties being auctioned off next Monday, we are going to look at these, hopefully do some title work and then go to the auction again to observe.

Couple other questions come to mind. Half of the properties at the first auction I attented sold at the opening bid price, why would this be? The houses needed little work so its not that they required a lot of rehab? Because of liens? is this normal?

Is buying at auctions your main strategy?

Any experience with liens? on a scale of 1 to 10 what is the likelyhood that the IRS will redeem?

Thank You again for your insight,

Del-Ohio

Very good Kim… - Posted by JT-IN

Posted by JT-IN on October 13, 2003 at 08:08:25:

Hi Kim:

I will post just a few additions above, but you have been paying attention these past few years… Haven’t you… learning quite a lot. Good answers.

Good to hear from you…

JT

Re: Ohio foreclosure auction questions? - Posted by JT-IN

Posted by JT-IN on October 14, 2003 at 08:06:40:

Dell:

What county are you located, in Ohio…?

Before you get all frothed up over these minimum bids being accepted, it would be good to understand a few things first… Just because a property goes for minimum bid, if the min bid was made by the Lender, that doesn’t mean that this was their top bid. e.g. Opening bid of 66K from the Plaintiff, no other bids, sold to the Plaintiff for 66K. The same case, lets say you also bid 66.1K, then the Plaintiff bid 70K… then you bid 70.1K, then the P bid 80K… and so on. No telling where they would have stopped, had there been another bidder… Now if the min bid si being made by someone other than the Plaintiff, then that is a different story; but doubtful, based on the one-bid description…

Do I rely on the appraisal…? Not too much… Most of the times they are not reflecting the current condition of the property, just seeking comps that have sold, and assuming that the house is in “A” condition… This is not reality in most cases, as when folks aren’t paying the mtg for the past several years, they are also not likely to being performing proper maintenance either… although I have seen exceptions to this rule… I have a pretty strong sense of RE values in my area, so I can usually come close with a comp right out of my backside… then I check public record to substantiate the backside approach.

IRS redemption…? Quite unlikely, but it can and does happen… I would say it happens in less than 1% of the cases. If they do redeem, they will pay you what you paid for the property, plus 6% interest. They will pay no other fees or fix up costs, except that there are exception to that rule, but only with a fight… That info is NOT from first-hand knowldge, thankfully…

Property tax liens are much more likely to be redeemed… depending upon what the property is; house vs. land… Does your county sell tax lien certs…? Many counties in Ohio sell Tax Deeds, which follow the same confirmation process as mtg foreclosures. The owner only has until confirmation of sale, usually 30 to 60 days, to redeem the property. This rarely happens on tax deed sales, due to the fact that if they could redeem, they would have paid for it prior to it going to sale in the first place. Therein lies another opportunity, once you become more proficient at foreclosures… Whenever there is a particularly good property that you didn’t buy at tax deed or mtg foreclosure sale, you can be the catalytic force in redeeming for a property owner… Of course you will only do this if you can clear all other matters on the title, in addition to having a Deed signed by the seller first… Just another wrinkle…

“Then we started thinking, Ok there is a thirty day redemption period. We could have the clean up one and be ready to go to market in 30 days.”

Whoops… you have gotten the cart before the horse here… This is the biggest problem with buying at Sheriff Sale… During the 30 day redemption period, the owner may still be occupying the property. Even if they are not, you legally have NO rights to occupy, repair, market, or step-foot on the property… (Of course I won’t say to you that I have never done this myself a few times). You don’t acquire any rights until after confirmation of sale… They if they are occupying, following confirmation of sale, you then file a “Writ of Possession” with the Clerk of Courts… This will cause the Sheriff to visit them at the property, post a notice to vacate, of whcih they then have 30 days to do so… The ntire confirmation and occupancy process can easily take 90 days. During that process, you are legally allowed to drive by and admire your equity… My average turn around on these properties are about 170 days… from Sheriff Sale to closing with a Buyer… Shortest time has been 59 days, and the longest, 10 months…

You need to completely understand the risks of buying at Sheriff Sale… such as liens, etc… but the biggest risk is lack of control for some time while the entire process is playing out. Some of these Atty firms are completely incompetent to do their job, which costs you money in the long run…

Just the way that I view things…

JT-IN

Re: Ohio foreclosure auction questions? - Posted by Kim

Posted by Kim on October 14, 2003 at 12:52:27:

Hi Del

You are asking some very good questions that are now out of my league. Hopefully JT will see these posts and respond again. This is really his mileau and he is the expert I rely on in this field. All I know about the sheriff’s sales I have learned from JT’s mentoring and I need to send a huge Thank You to JT for that. He is an excellent mentor for those who may not know that.

Sorry Del, you are now way over my level of knowledge, I do not buy at auction, I am concentrating on preforeclosures because,as JT taught me, sheriff’s sales at not the place for me necessairly at this time.

Re: Ohio foreclosure auction questions? - Posted by Del-Ohio

Posted by Del-Ohio on October 14, 2003 at 20:16:40:

I am in Holmes County. Stark is the county where we have been doing our foreclosure auction “investigation”.

Ok Ok more things are becoming clear. I remember shaking my head and asking my partner of any logic he could come up with, why a bidder would jump in 5,000 increments when his runner up bidder went in 100 increments. Seemed like he could have saved himself 4,000+. I see what was happening now.

Tax Lien Certs, I dont know if our county sells them, seems like I have seen tax sale notices in the paper but was not really paying attention. I will check into this once I am more fasmiliar with the foreclosure market.

Ok so the owner has thirty days right of redemption. So the odds of him getting financing during this time I suspect is highly unlikely.

See if I understand this correctly
Owner has 30 days to redeem
First Mortgage Holder had “bought” the property
The second mortgage holder has a week to redeem after the 30 day period
The third lien holder has 30 days + 2 weeks, and it continues in the pattern until there are no more lienholders.

Does the IRS and property tax liens automatically fall into any certain position or do they fall in senior/junior position based on when they attached their lien?

So running a scenario, say the IRS has a lien against a property and a second mortgage is junior to the IRS lien. The second mortgage holder decides to redeem at five weeks even though the IRS has a lien senior to it, does the IRS lien have to be paid off at that point. Similar scenariothird in line lienholder forecloses, does the first get paid off and then the second even if it is a tax lien and the balance goes to the third position even though they are the [person foreclosing.

Ok Enough questions for now.

Thank You Very Much, your help is immensely appreciated.

Del-Ohio

Whhops, you have run aground Dell… - Posted by JT-IN

Posted by JT-IN on October 14, 2003 at 21:52:14:

Dell:

Sorry, your understanding of the Ohio Foreclosure process has become slightly off centered somewhere along the way… This business of the 2nd having so long, and the 3rd longer yet is way off here…

Here is how it is:

The foreclosing lien… let’s say for example it is the 1st mtg… files the lawsuit, and gives notice to anyone else, including the homeowner, that has an interest in the property. Ok, for e.g. we will say there is a 2nd, a 3rd, and an IRS Lien… They all are served notice… and all lien positions exceot the IRS must show up at auction to protect their position… This is done by bidding at the sale… If they do not bid, they have NO redemption right whatsoever… they have effectively been foreclosed from their security interest in the property. The Debtor still owes them the debt, but they no longer have a mtg… protecting (securing) the debt.

The IRS, on the other hand, does not need to bid… They have this magical power which they rarely ever utilize, called the Redemption or Recission Rights… In Ohio that period is 120 days… Again, all other Jr liens if they do not bid at the sale, are history, as long as they have been properly served…

In your example of the IRS being sr to a 3rd mtg… You will rarely see this happen, especially if the title company does a proper search… due to the fact that once an IRS lien exists, no lender will provide financing until that lien is released… As to liens falling off, research some completed cases and you will see the lien release in the form of cancellation of mtg’s that existed on completed sales… Again, a very good idea to know and understand completely what is happening to the letter of the law… If you do, you will be the only one in the county… LOL

In Stark Co, Ohio, it appears that they sell Tax Lien Certs… instead of Tax Deeds… I reasearched the Sheriff’s site and you can view the info at the below link:

http://www.sheriff.co.stark.oh.us/pr11.htm

I would serve you well to pay a visit to the Sheriff’s Office on a non-Sheriff Sale day. Ask lots of questions, and they will usually provide some good answers… You won’t learn it all in one day, but you begin with the foundation, and build up from there…

You will find this to be a highly technical field and there is much to know… When you know it, you will be better equipped than most of the Attys who are practicing in the foreclosure arena… as most of them are largely uninformed, sadly so…

Wish you well with the info…

JT-IN

Re: Whhops, you have run aground Dell… - Posted by Del-Ohio

Posted by Del-Ohio on October 15, 2003 at 23:10:20:

>your understanding of the Ohio Foreclosure process has become slightly off centered

Thank You for getting me back on solid ground. Another poster had a reference to the one week extra based on senority. This makes more sense.

Question; you mentioned that if the junior mortgage holder does not show up to bid on the property he is
"wiped out" .

Does that mean… let me run a scenario, say there is a first mortgage for 100,000 and a second mortgage for 20,000. Say the first mortgage holder bids to 100,000. to protect their interest. In order for the second mortgage hoolder to protect their interest, he would have to bid 120,000? I can see them doing this if the house is worth say at least 120,000.

But what if as is the case many times the house is worth only 100,000 or less. It would not make much sense for the second mortgage holder to buy this property, because if they bought it for 120,000 and it ended up selling only for 95,000 they would have lost more money yet, because they would have to pay off the 100,000 first mortgage before it could be sold.

Am I on the right track here. The second mortgage holder would only bid if there was significantly more equity then what is owed to the first mortgage holder?

I am going to spend some time at the court house next week and see what I can learn there.

Leaving for Canada tomorrow evening, just got a verbal agreement from the seller on 100 acres of land on Bobs Lake, just north of Kingston. Hope to get the paperwork signed this weekend. Taking a bit of a break, weekend leave tour to the lake and then down to Finger Lake Region in NY for a few days.

Thank You for all your help it is greatly appreciated. If you ever take a tour through Amish Country look me up, I will spring for a good Cup’o Joe. Hey, for all you have provided me I will even put you up at a nice upscale log cabin, chalet or villa for a night at no cost to you. You can punch in http://www.donnasofberlin.com/ my brother/partner owns it, I printed out copies of your responses for him, so I dont think I would have to twist his arm to much to get you a free night.

Thank You again

Del-Ohio