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					AS SEEN IN OHIO LAWYERS WEEKLY – MARCH 13, 2000




Contact:
Tanya Tybur
Marketing Director
Weltman, Weinberg & Reis Co., L.P.A.
323 W. Lakeside Avenue, Suite 200
Cleveland, OH 44113
PHONE 216-685-1098
FAX 216-363-4121
ttybur@weltman.com

Issues For Purchasers of Real Estate at Sheriff’s Sales

By: Larry R. Rothenberg, Esquire

Shrewd purchasing of real property at sheriff’s sales either for personal use, as rental property, or to
quickly resell can be profitable. However, there are numerous traps for the unwary, which could turn the
hoped for profit into a fiasco. Caveat emptor (let the buyer beware) should be the watchword as to title,
condition and possession issues. The following are eight critical issues about which purchasers should
be advised prior to entering this arena.


1. Will the Sheriff’s Deed Convey a Clear Title?


A sheriff’s deed carries with it no warranty, other than perhaps, that the signer is in fact the sheriff
(Corwin v. Benham, 2 Ohio St. 36 (1853).


For the purchaser to acquire clear title, it is necessary that all interests in the premises be extinguished,
including all ownership interests, liens including the outstanding real estate tax lien, dower interests, etc.
In order for the court to extinguish the interest, it must have acquired jurisdiction over the person of each
owner of such interest. Hence, each necessary party must have been named as a party to the case and
served with a summons, or waive service of summons.


The attorney for the plaintiff obviously owes a duty to his or her client to ensure that all necessary parties
are named and served. After all, there is a strong likelihood that the plaintiff will be the highest or possibly
the only bidder at the sheriff’s sale. However, there is no such duty owed to other bidders, and therefore,
they need to protect themselves from acquiring a clouded title.


Most courts throughout Ohio require the filing of either a preliminary judicial report, title commitment, or an
attorney’s certificate of title at or near the commencement of the foreclosure case. Potential sheriff’s sale
purchasers should examine both the title information and the service of summons records in the court file
prior to the sheriff’s sale in order to make sure that the plaintiff’s attorney did not inadvertently neglect to
name or serve a necessary party.

         Burlington, (NJ) • Cincinnati • Cleveland • Columbus • Detroit • Philadelphia • Pittsburgh   www.weltman.com
AS SEEN IN OHIO LAWYERS WEEKLY – MARCH 13, 2000



Prospective purchasers can obtain clearer protection from the risk of a title defect by obtaining a
commitment for title insurance directly from a title insurance company prior to bidding. Potential buyers
should then convert the commitment to an owner’s policy of title insurance in the event he or she
becomes the purchaser at the sheriff’s sale.


2. Terms of Sale

In most counties, the bidder (unless it is the first lienholder) is required to deliver to the sheriff at the time
of the sale, a down payment of a percentage (10% up to a maximum of $10,000 in Cuyahoga County) of
the bid amount, in certified funds. If a successful bidder does not have certified funds for the required
deposit at the time of the sale, the bidder could be found in contempt of court and lose the ability to
complete the sale (O.R.C. Section 2329.30). Hence, all bidders should have certified funds payable to
the sheriff on hand at the time of the sale. The balance of the purchase price is due within 30 days after
the sale, and in many counties, interest accrues on the unpaid balance beginning eight days after the
sale. Therefore, time is of the essence for the purchaser to secure financing if necessary, in order to
deliver the balance to the sheriff. Extensions of time to pay the balance may be obtained from the court
upon motion, for good cause, but interest continues to accrue in many counties until the full purchase
price is delivered.


Many lenders require an interior inspection for an appraisal in order to approve an application for
financing the bidder’s purchase. If the occupant of the property does not cooperate, it may be difficult to
obtain the necessary interior inspection. Many courts, upon motion, will order the occupant to permit the
inspection, although the purchaser should be aware that the delay incurred while obtaining and enforcing
such an order could become costly in terms of attorneys fees and the continuous accrual of interest on
the unpaid balance.


3. Redemption Rights

Until the court enters its order confirming the sale, the purchaser does not have a vested interest in the
property. Ohio Savings Bank v. Ambrose, 56 Ohio St. 3d 53, 563 N.E. 2d 1368 (1990). Ohio Revised
Code Section 2329.33 provides the owner with a statutory right to redeem the property at any time prior
to the court’s entry of its order confirming the sheriff’s sale by paying the balance due on the judgment to
the plaintiff and other lienholders, interest, and the court costs. If the property is redeemed, the court
upon motion should vacate the sheriff’s sale, and the bidder will have no rights other than to the return of
the deposit paid to the sheriff, plus interest thereon in some counties.


4. Bankruptcy by Owner



         Burlington, (NJ) • Cincinnati • Cleveland • Columbus • Detroit • Philadelphia • Pittsburgh     www.weltman.com
AS SEEN IN OHIO LAWYERS WEEKLY – MARCH 13, 2000

A bankruptcy filed by the owner after the sheriff’s sale but prior to the court’s entry of an order confirming
the sale will result in an automatic stay of the action (11 U.S.C. 362), until the bankruptcy stay is lifted.
The Bankruptcy Court order lifting the stay might not occur for many months or even longer in the case of
a Chapter 13 bankruptcy. If the purchaser is patient and if the bankruptcy stay is ultimately lifted, the
sheriff’s sale can be confirmed and the purchase can be completed at that time. However, the sheriff will
hold the deposit paid by the bidder during the delay. If the purchaser learns of a bankruptcy by the owner
prior to confirmation, and the purchaser is not interested in completing the purchase in view of the delay,
the court may grant a motion by the purchaser to vacate the sale and order the return of the purchaser’s
deposit.


5. Gaining Possession of the Premises

If the property remains occupied by a party who was served with a summons in the foreclosure, the
purchaser may recover possession through either a writ of possession or a municipal court eviction. The
order confirming the sheriff’s sale provides the order for the clerk to issue a writ of possession to the
sheriff for execution by the sheriff. The purchaser need only file a praecipe for the issuance of a writ of
possession. The sheriff will then serve a notice at the premises advising the occupant that the premises
are to be voluntarily vacated by a deadline set by the sheriff. If the occupant fails to vacate the premises
by that date, the sheriff will schedule a move-out date. The purchaser is generally required to be present
either personally or through an agent, and to provide a locksmith and movers, and, in most cases,
storage of any household goods removed, for a reasonable period of time.


In a municipal court eviction action, a three-day notice to leave the premises must be served prior to
commencing the eviction action. The purchaser or an agent must attend the eviction hearing in order to
testify as to the purchaser’s ownership of the premises, the fact that the occupant is occupying the
premises without authority, that the three-day notice was served and that no rent was accepted by the
purchaser.


6. Condition of the Premises

Unlike arms-length purchases, there is usually no opportunity to view the interior of the premises prior to
bidding and no disclosure of any patent or latent defects. The purchaser obviously must consider these
risks in determining the appropriate amount to bid. If defects in the premises are discovered after the
sheriff’s sale is confirmed and the purchaser takes possession, the purchaser may have a very difficult
time trying to unwind the purchase.


The purchaser should definitely arrange for hazard insurance on the premises immediately after the
sheriff’s sale, as the purchaser’s title relates back to the sale date, and therefore, the purchaser has an
insurable interest.

           Burlington, (NJ) • Cincinnati • Cleveland • Columbus • Detroit • Philadelphia • Pittsburgh   www.weltman.com
AS SEEN IN OHIO LAWYERS WEEKLY – MARCH 13, 2000



The purchaser should also keep an eye on the premises prior to taking possession in case it may become
necessary to report to the police any acts of vandalism, illegal entry, or removal of fixtures by the prior
owner or others.


7. Zoning, Special Assessments and Conveyance Fees

If the purchaser intends to the use the premise for a special purpose, the zoning requirements of the
municipality obviously should be checked prior to bidding. It would also be a good idea to check with the
municipality for any special assessments which may not have been certified to the county tax duplicate
and therefore may not be apparent on an ordinary title exam. Then, the purchaser will not be caught by
surprise by substantial special assessments being included with his tax bill following his purchase. The
purchaser should also be aware that many counties consider the payment of the conveyance fees at the
time the sheriff’s deed is recorded to be the obligation of the purchaser.


8. After Acquiring Title and Possession

If the purchaser’s intent was to acquire the property and quickly resell it at a profit, time obviously is of the
essence. While the purchaser holds title to the property, expenses generally are incurred for taxes,
insurance, and maintenance items, and the risk of loss due to depreciation, vandalism, or other risks that
are present. The property should be winterized during the cold weather months in order to avoid damage
caused by burst pipes.


Conclusion

Attorneys who counsel their clients to address all of these aspects beginning well before the sheriff’s sale
and continuing through the closing of a resale, can assist their clients in realizing substantial profits or
even earn good livelihoods by being accomplished sheriff’s sale purchasers.



Larry R. Rothenberg is the partner managing the foreclosure/evictions department of Weltman, Weinberg
& Reis, Co., L.P.A. (WWR). WWR provides lenders with foreclosure/evictions, bankruptcy, commercial
litigation and related services throughout Ohio, Kentucky, Indiana, New Jersey, Pennsylvania, and
Michigan, and collection services. WWR also provides real estate title and closing services in the states of
Ohio, Kentucky and Michigan. The firm has been providing comprehensive collection and litigation
services to some of the largest credit grantors in the nation including major banks & financial institutions,
mortgage & lending companies, commercial creditors, government entities, insurance companies, credit
unions, service organizations, and utility companies.                                                 Practice areas include bankruptcy, collection

         Burlington, (NJ) • Cincinnati • Cleveland • Columbus • Detroit • Philadelphia • Pittsburgh                                       www.weltman.com
AS SEEN IN OHIO LAWYERS WEEKLY – MARCH 13, 2000

services, foreclosure/evictions, legal action recovery, litigation & defense, and probate (deceased
collections). The firm has offices in Burlington (NJ), Cincinnati, Cleveland, Columbus, Detroit, Philadelphia
and Pittsburgh.




         Burlington, (NJ) • Cincinnati • Cleveland • Columbus • Detroit • Philadelphia • Pittsburgh   www.weltman.com

				
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