What Is a Sheriff’s Sale?

Being a homeowner is stressful enough as it is these days. Dealing with house repairs, budgeting, paying property taxes, and shopping for this week’s groceries while trying to keep things balanced in your busy life can be difficult. Falling behind on your mortgage payments and facing the possibility of a foreclosure or a sheriff’s sale is even more stressful.

This article will discuss what a sheriff’s sale of foreclosed property is and the steps you can take to prevent it.

Sheriff’s Sale Basics

A sheriff’s sale is a public auction typically held by the sheriff’s office where people purchase foreclosed properties. An example of a foreclosed property is a single-family home that the homeowner failed to make several monthly mortgage payments on. As a result, the mortgage lender, or the bank, takes legal possession of the house. The bank then sells the house at a sheriff’s sale to try to recoup what the homeowner owed on the mortgage.

Sheriff’s sales, also called foreclosure sales, do not happen overnight. The mortgage lender must give written advance notice after a homeowner has been in default—that is, late on their mortgage payments—for a few months. To avoid getting to this point, make sure you always read the letters and mortgage statements your lender sends. Take time to review them, understand them, and develop a game plan.

While it is completely understandable to be anxious and worried about a possible foreclosure sale or sheriff’s sale, don’t panic or ignore the situation. Understanding how this works will help you make better decisions.

How a Sheriff’s Sale Works

A sheriff’s sale is a public auction of foreclosed real estate that the sheriff’s office holds at the county courthouse or online. The mortgage lender must notify the borrower in default prior to a sheriff’s sale. They must also give the borrower time to get caught up on their mortgage payments.

Once the grace period has passed, if the homeowner is unable to either get caught up on their mortgage payments or make other arrangements with the lender to address the default, the property is auctioned off to the highest bidder at the sheriff’s sale. The county courthouse usually posts the sale information, including the time of sale and the date.

The highest successful bidder at the sheriff’s sale must pay with certified funds such as a certified check to purchase the property. That money goes toward the arrears, fees, and principal of the mortgage debt. If that sum is greater than the arrears, fees, and principal of the mortgage debt, then there will not be a deficiency. If it is less, there may be a deficiency.

Understanding Foreclosure

Foreclosure is a legal process in which a lender takes a piece of real estate and sells it to a new buyer because the original homeowner hasn’t paid their mortgage. A mortgage agreement allows the lender to have a lien, or security interest, in the house. The house is collateral on the financing you received from the lender. If you don’t pay your mortgage payments, the lender can take back the collateral.

Foreclosure is one of a lender’s tools to enforce their legal rights. Usually when a lender starts the sheriff’s sale process they must get a court order. This is in a judicial foreclosure. An alternative is foreclosure by advertisement or non-judicial foreclosure. This is when the real property is advertised in certain business journals for a specified time and then there is the public auction.

Preventing Foreclosure

There are many ways to prevent foreclosure. Each situation is different and what works for some might not work for others. That said, stay on top of things, ask what your options are, and don’t ignore the problem. Be proactive and realistic about your situation. 

You may be able to prevent a foreclosure by:

1. Working with a mortgage counselor: Many organizations and government agencies have housing counselors and mortgage counselors available to discuss your financial and housing situation. They often have FAQs on their websites, which are a good place to start.

2. Requesting a loan modification: Getting a better interest rate or extending the term of your loan can help make your monthly mortgage payments more manageable.

3. Refinancing your mortgage: This option is best for people who expect to stay in their home for the long term and who have a good credit score.

4. Obtaining a repayment plan: Work with your lender and servicer to come up with a repayment plan that allows you to spread out your past-due mortgage payments and get current on your mortgage.

5. Getting a forbearance: This is a good option if you’re going through a temporary financial hardship but expect to be consistent and able to make your mortgage payments long term.

6. Getting the lender to waive fees and penalties: This can help ward off mounting debt.

7. Paying off the mortgage debt and obtaining a reinstatement of your mortgage: This is one of the best, but most difficult, options. Not many people have a lump sum laying around for them to pay off the mortgage arrears, but if you can, it’s something to consider. 

8. Selling the home: This is a good option if you have equity in the home or you could reasonably get a good purchase price.

9. Looking into and obtaining a deed in lieu of foreclosure: This gives you more control over the timeline of losing your home. 

10. Challenging the foreclosure: If there are questions about the legality of the foreclosure notice or the sheriff’s sale, you may want to contact a foreclosure attorney.

11. Filing bankruptcy.: This is a last resort.

Stopping a Sheriff’s Sale

You may be able to stop a sheriff’s sale by “redeeming” the property before the sale happens. Redemption is paying off the outstanding debt, including fees and costs. Some states allow homeowners and borrowers to redeem after the sheriff’s sale. 

Let’s Summarize...

Falling behind on your mortgage and facing the prospect of foreclosure is scary. If you find yourself in this position, don’t be embarrassed or ashamed. Remember that you have options to stop foreclosure and avoid a sheriff’s sale of your property. Reach out to your lender as soon as difficulties arise. And be sure to read any statements or other information your lender sends.