What is a Sheriff's Sale?

A sheriff's sale is an auction used to liquidate property for which a mortgage borrower has defaulted. It allows banks and other financial institutions to recover money lost when a mortgage borrower defaults on a loan. Some people confuse sheriff's sales with tax sales, but the two are not the same. Tax sales are used to liquidate properties with tax liens against them instead of to auction homes lost in foreclosure.

The properties listed for auction in a sheriff's sale are there because of court-ordered foreclosures. This means a property owner defaulted on a mortgage loan and the bank that granted the loan sued him in court. If the bank proves its case in court by showing the borrower failed to pay as agreed, it then has the right to sell the home. The bank then puts the property up for auction in a foreclosure sale.

In some places, an auction for foreclosed properties is not called a sheriff's sale. Some jurisdictions simply refer to these auctions as foreclosure sales. There are many other regions, however, that require a sheriff's office to administer the sale. This is why foreclosure auctions in these areas are referred to as sheriff's sales.

When an individual attends a sheriff's sale in the hopes of purchasing property, he must be prepared to accept any property he buys as-is. Typically, homes offered for sheriff's sale are not available for inspection before the auction. This means the buyer is making a purchase without seeing the inside of the house or learning about its condition. Neither the sheriff’s office or other parties involved in the sale make any claims or offer any warranties on the properties for auction. A prospective buyer may drive past a property and see it from the outside, but he has no legal right to enter the property.

Sheriff's sales are public auctions, and prospective buyers bid on the properties in which they are interested. Each property goes to its highest bidder. The starting bids on foreclosure properties are usually low and vary based on the laws of the jurisdiction in which the sales are held. In many places, the bank or financial institution that granted the loan for the foreclosed property makes the opening bid. Though the starting bids on these homes may be low, foreclosure auctions can be competitive, and properties may sell for much more than their starting bids.