http://www.heraldtribune.com/article/20091113/ARTICLE/911131051/2117/REALESTATE?&tc=autorefresh

Not all sales give you clear title.

There was one in my old neighborhood in PB County about 5 years ago that went to sheriff sale. The bidding was vigorous and finally sold at a price about 100K less than neighborhood values. All professional investors bidding.

None of them took the time to walk around the property before the courthouse sale. The prior owner had started a fire on the back side and burned the master bedroom off the back of the house. The blackened front windows and police tape should have been a clue, huh?

These people all claim to be professional investors, but they don't take the time to do their due diligence. They get no sympathy from me.

I had an investor client for a couple of years who was building new homes as well as trying to sell his rentals that were in poor condition. The guy admitted, finally, that he had never set foot in the one before buying it. It's uninhabitable, barely worth the land value, since you'd have to knock the cinderblock house down & haul it off, but the bank has it mortgaged for 3x's that amount. I don't know who is more foolish - the bank, or the owner.

I have a friend who buys properties on the courthouse steps. He inspects them on the morning of the auction. He at least does a walk around if he can't get inside, as is the case with some vacant properties. Looking through the windows helps to determine conditions to some extent, but he will run his numbers with a worse case scenerio in mind.

He knows how much it would cost him to totally gut and rebuild the inside and so his highest offer at the auction takes that possibility into account. He's been able to pick up some great deals and it's a pleasant surprise when he gets into the property after buying to find out it's in better condition that he expected.

Some who know what they are doing do well. Most have no idea of the pitfalls

You have to know someone to run title for you or else you are taking a big gamble, I heard of guys buying the second loan Be very careful

I would try to see as much of the house as I can. Moreover I would do I title search for the house to check out if there some unpaid taxes etc.

I was under the impression that foreclosure wiped out any liens on the property unless it was a tax sale... interesting.

Many states also have a "Right of Redemption". If the person who was foreclosed upon comes up with the money within a certain period of time, they have the right to get the house back. This can be very disturbing to an ivestor who bought the home at auction and put a lot of improvements into it. It doesn't happen often, but enough that investors should be aware of it.

Foreclosure rights just like tax liens vary by state. Tax liens vary down to the county and even cities in some cases.

The response that all lines are wiped out at foreclosure is not true and a common misconception. Just like if you filed bankruptcy some things survive the process. For instance bankruptcy you can't wipe out child support,IRS taxes,student loans etc.

For foreclosure you need to learn the time lines for your state.Whether you have a judicial (court) or non-judicial (no court) foreclosure process and if you have pre,post, or both kinds of redemption rights and for how long.

In every state property taxes are a senior lien to EVERYTHING PERIOD.They survive foreclosure and must be paid. If the laws weren't set up this way counties and cities would crumble as they would never get the revenues needed to run the government (which they are having trouble now with reduced tax digest values).

In addition you need to watch out for IRS tax lien. By law the IRS has 120 days after the sale to make a claim on the property to redeem.If they do not their redemption rights expire. Sometimes you can get the IRS to waive their rights earlier than that but as an investor do not want to put a dime in the property because the IRS is only responsible if they redeem for what you paid at the courthouse steps and NOT improvements you have made to the property since then.

In post redemption states investors will approach the homeowner being foreclosed on and offer them a certain cash payment if they are the winning bidder if the homeowner signs a waiver of their redemption rights document.

This way the homeowner can't wait out the full 3 or 6 months and want more money on the deal.Once you win at auction you have the redemption waiver agreement signed for the agreed amount and then you pay them after they have left and you change the locks.

I am in Georgia and we have no post redemption rights but another investor friend of mine lives in a post redemption state and this is how he structures his deals.

BusinessJohn's friend has the right idea. Always plan for the worst case scenario and if the numbers still work then you're in the clear. Just make sure that others aren't bidding higher on the back of solid information. A walk-around is the least you can do.

Buying at the steps is big league play. If you are a normal buyer without expertise and deep pockets, you'd be risking alot to buy like that. If it were that easy, everyone would do it.

Even as an REO Broker I would not go for it. There are good deals elsewhere, where I know the rules and procedures like the back of my hand.