Re: Sheriff Sale Property Auctions
Tread carefully through the first (and maybe even second) quarter of 2012. There's a lot happening that isn't being communicated to the public - many corporate/commercial real estate deals are perpetually financed, generally for five year terms. The problem as it relates to 2012 is that commercial RE deals that were done in 2007 at 1% or less are coming due this year and from what I've read banks aren't interested in lending these deals at less than 3-4%. There are a lot of these large portfolios that are barely scraping by at 1%, and would be very squarely in the red at 3-4%. This means that the banks will either a) not lend, or b) foreclose the property when it's refinanced and the obligations aren't met. As a bank, you can eat a lot of bad residential mortgages with one commercial deal gone wrong (think of a $50 million deal as relatively small). So, the banks aren't out of the woods yet.
Here's how that relates to residential properties: if you think back to the beginning of the foreclosure crisis, people were going through savings, retirements, etc. to try to meet obligations. Banks did a lot of advertising that appealed to consumer "morals" and convinced people to react emotionally to what is a business transaction. Then consumer's got savvy and started walking away from deals when it became clear that recovery wasn't likely; this way they at least kept savings and retirement funds for feeding the family and so they weren't starting from zero when they became financially stable again. The banks didn't expect that, and got stuck with a lot of properties. Well now the banks are getting savvy and starting to walk away from the deals too, generally by kicking the can down the road at the time of the sheriff's sale. There are a bunch of reasons for this, probably the most compelling being 1) the liability of having property that isn't inhabited (there are a lot of strange legal issues here), and 2) the tax burden. So if you look carefully (at least around here) you can often find properties that both the consumer and bank walked away from. These properties are now the city's problem.
This poses an interesting dilemma. On one hand, it costs a bit of money for a city to raise a house, and once that's done the property is not generating tax revenue (and also lowering the tax revenue from nearby homes that have dropped in value because they're next to a now vacant lot). On the other hand, the city is really only interested in the house to the extent it's there (not causing the neighborhood to look like swiss cheese from all of the demolished homes) and it's generating tax revenue. So, if you know your way around numbers (and a few key financial metrics) and you know your way around people, you can make a compelling case for getting a house for way cheaper than you might think. This mostly happens in more affluent areas too, since these places are generally where property taxes are higher. Then you live to pay taxes, but you can't win 'em all.
Whatever you do, get familiar with two words: due diligence. Find (or have someone find for you) any recorded document for a property in question. Here's how the big boys play: plan to buy a property, find out how many different ways it's "encumbered" (liens, etc.), and find how many of those note holders want to wash their hands of the property. You then try to get people to agree that if the sale goes through they will modify or release their encumbrances. You can sometimes get banks to agree to do some pretty strange things if it's in their best interest to do so. You can also do the same with cities in terms of taxes on properties that have been dormant for a while since it's more profitable in the long run for them to get you paying taxes from today forward, than trying to get someone to agree to a deal with a ton of delinquent taxes on top of those currently due. Most commonly the tax deals take the form of an agreement that you don't have to pay the back taxes, provided you stay current on your taxes for the next X years. Just be careful because you really only want to do this on a property you're almost certain to by if these concessions are made; otherwise they're less likely to negotiate (it costs them a bit of money to research the impact of dropping an encumbrance and they won't keep spending the money on legal fees if you have a record of backing out of potential deals).
It's a lot of reading, and real estate is good for big words, but once you get a head of steam (and consult a lawyer as you see fit) you'd be surprised what you can find.
