For The Tribune-Democrat
I went to four sheriff’s sales last week on behalf of my clients. Three were in Cambria County’s courthouse in Ebensburg and one was at Westmoreland County’s courthouse in Greensburg.
A sheriff’s sale is an auction of real estate of people who have been unable to keep up their mortgage payments. It could be for some other debt, but almost always it’s for a delinquent mortgage.
It has nothing to do with a tax sale, but I have found the two are often confused.
If you decide to go to a sheriff’s sale in hope of finding a bargain, let me explain why that probably won’t work.
In the first place, you will find a number of attorneys at the sale. That’s not necessarily a bad thing. They make good company, but they are representing the creditors, usually banks, which have initiated the sales. At a typical sale, 50 to 100 properties will be auctioned.
Prior to the sale, the attorney and the banker sit down and discuss what the attorney should bid at the sale. Yes, the bank has to bid to get ownership of the property but – and that’s a big BUT – the bank can bid up to the amount of its debt without having to pay its bid.
And why is that?
Well, let’s see what would happen if the bank does pay the amount of its bid.
Let’s say the bank is owed $50,000 and so it bid and pays $50,000 to the sheriff. Then what?
Well, the sheriff distributes the amounts bid to the creditors, and mortgages get paid first, and the sheriff would end up giving the $50,000 back to the bank, so we shorten the process.
Now the sheriff, prior to the sale, has calculated his costs for having the sale, including unpaid property taxes, and that total becomes the opening bid.
That amount is known by the attorneys and will be told to anyone who asks. The usual language is, “The bank bids costs.”
No big deal – they have to be paid by the creditor anyway.
Most properties are sold for “costs.” But if it has to, the bank’s attorney will bid up to the amount of the debt or such lower amount as the bank has directed. (Sadly, some properties aren’t worth the amount of the debt.) So why doesn’t the bank just bid $50,000 right away? Because, by law, the sheriff’s office gets 2 percent of the bid price, so a bid of $50,000 would cost the bank an extra $1,000.
Oh, and don’t hope the bank attorney has a flat tire and cannot make the sale. The property or properties cannot be sold unless someone from the bank is there. If you’re really interested in a particular property, call the bank first. They’d be more than happy to sell you the property after the sale.
Thomas Young, a graduate of Pitt and Harvard Law School, has been a lawyer in Johnstown since 1958. He is a former professor of business law at Pitt-Johnstown. Readers may send questions to Young in care of The Tribune-Democrat. The opinions expressed in this column are general in nature and may not apply to your situation. Consult your attorney for advice on specific legal matters.