Potential Issues with Online Auction Properties

By: Litigation and Creditors’ Rights & Bankruptcy Practice Groups

Have you ever considered purchasing property through an online auction site? While online property auctions can present excellent opportunities for the savvy buyer, they may also create pitfalls for the unwary. At Saalfeld Griggs, we are increasingly meeting with businesses and individuals who purchase properties through online auctions only to discover they are inheriting a host of problems unsolved by a foreclosing creditor. Here are three common problems that can arise with foreclosed property later purchased in online auctions:

Clouds on Title: Properties available on online auctions can have complicated foreclosure histories. The selling creditor usually becomes the owner after a foreclosure. The court records for the foreclosure lawsuits are often complicated and confusing and can be littered with amended pleadings to correct earlier mistakes, raising due process questions about notice to former property owners. These issues may raise questions about the validity of the underlying foreclosure process, creating difficulty when obtaining title insurance or trying to sell the property.

Occupant and Tenant Issues: An issue that often goes hand in hand with a clumsy foreclosure is the matter of former owners or occupants of the property who refuse to move. The selling creditor frequently leaves the process of evicting a former occupant or tenant to the highest bidder. Without more details, a bidder may be left to discover from an uncooperative person whether the tenants/occupants were named in a foreclosure, given notice, or are good-faith tenants who paid rent. Each of these are critical questions to ensure that proper notice in an eviction action occurs. A lesson for a prospective online bidder is that you may not immediately receive access to the property you’re buying. Instead, you may have to evict occupants with the risk, delays, and costs that accompany that process.

Condition of the Property: A third issue is the condition of the property. Property available at an online auction may have been unoccupied for some time. The former owner and/or occupants have little or no incentive to take care of the property during or after the foreclosure and can leave personal items and garbage behind. Dealing with abandoned property is time-consuming and can be expensive with no prospect for recovery. Often you are buying a property “as is,” and it will be your responsibility to fix these issues, not the selling creditors. There is no real recourse against an evicted former owner/occupant either, and no realistic way to collect any judgment you might obtain.

This is not an exhaustive list of potential problems with an online auction property. But by being on the lookout for these issues, the savvy buyer can be prepared to deal with them and take advantage of unique opportunities. If you have questions about this article or are facing similar challenges after purchasing property from an online auction, the attorneys at Saalfeld Griggs PC have the experience and expertise to help.

Joshua Feil is an associate in the Litigation and Creditors’ Rights & Bankruptcy practice groups. The information in this article is not intended to provide legal advice. For professional consultation, please contact Erich Paetsch or Joshua Feil at Saalfeld Griggs PC.  503.399.1070.  jfeil@sglaw.com  © 2019 Saalfeld Griggs PC.