Alternatives to Sheriff’s Sales in Foreclosures
Kegler Brown Creditors' Rights + Bankruptcy Alert March 5, 2015
Most lenders know the process for foreclosures in the states where they take security. In Ohio, that process typically involves obtaining a judgment and then setting the property for sheriff's sale. However, there are many viable options to a sheriff sale that can help cut down on time, expenses and often increase the prices obtained. In addition, some of these options make the odds of the lender acquiring the property back for its REO department much lower.
First, the lender can sell the property at private auction. Ohio Revised Code Section 2329.151 authorizes the sale of "…goods, chattels, or lands…" by either an officer of the court (sheriff) or a licensed auctioneer. That auctioneer appointed by the court, can be compensated and receive reimbursement for the expenses of advertising the sale pursuant to ORC §2335.021. Because a lender's property can wait for months before it comes to the top of the list to be sold by the county sheriff's departments, using a private auctioneer can drastically reduce the time to sell a property. Additionally, the auctioneer can make use of its mailing list and other means of advertising, whereas the sheriff will only publish notice of the sale in the legal ads of the local paper. This typically results in a much better attendance at the sale and often a buyer other than the lender will be the successful bidder. Moreover, the auctioneer can conduct the sale on site of the property, allowing a better look at what the bidders are buying beforehand. In contrast, the sheriff's sale is conducted at the courthouse.
Another alternative to a sheriff's sale is to have a receiver appointed and then to sell the property through the receivership. Although it may not make sense to appoint a receiver solely to sell the property, the receiver offers the same type of benefits of a private auctioneer (greater advertisements, quicker sale turn around, and sale on site). Additionally, a receiver has the power to sell the property other than through an auction. It can ask for court approval to list the property and sell it through a private broker if appropriate. Therefore, if a receiver has already been appointed in the case, it makes a lot of sense to have the receiver market and sell the property through the most appropriate means dictated by the circumstances and to skip the sheriff's sale.
These are two viable alternatives to sheriff's sales. There are others out there, limited only by the creativity of the lender, its counsel and the law. There is a lot of room to exercise creativity, and doing so can save the lender fees, time and possibly the added burden of taking the property back into its real estate portfolio. Consider the alternatives the next time you are faced with a long wait to a sheriff's sale.