Our Adventure in a Foreclosure Flip

02.27.2013 The Adventure Begins

The adventure started on the steps of the Minnehaha County Courthouse. With the exception of one banker, a homeowner wanting to see the outcome of her home's sale and another bidder, it was a Sheriff's Deputy and the Clerk. The house we were interested in buying came up - the notice was read and the clerk began taking bids. The bank bid, followed by the other bidder. I let them go back and forth in $100 increments. A pretty painful experience. Then came the large pause. The bid was still under my set limit (limit that my hubby and I had agreed to pay for the foreclosure). I threw out my bid and added "including fees". In South Dakota, if you aren't the bank you pay an approximate $1800 fee on top of your bid. The clerk took the bid and waited. The other bidder raised $100 (seriously?). I raised $100. Silence. Once, twice, thrice...I had just purchased a small two bedroom home in a nice neighborhood.

After providing my information to the clerk, I was off to the bank. I was required to return by 3:00 pm with a cashier' check for the purchase amount, along with a prepared Certificate of Sheriff's Sale.

To the banks credit, they gave us their attorney's number, and advise he would be willing to review the paperwork and assist - at no cost to us. Wow! A stop at the bank withdraw funds and have a cashier's check issued. A call to the attorney. A half hour of paperwork. Back to the Sheriff's Office I went. Within minutes, I was given the Certificate of Sheriff's Sale to file at the Registrar of Deeds. Luckily the Sheriff's Office and County Offices are located within the same block. I walked over and proudly filed my Certificate of Sheriff's Sale. Of course, with the $30 filing fee.

Now what?

We wait: South Dakota has a 180 day redemption period (60 if the property is vacant). But the previous homeowner was still in the home. Sigh.

We get insurance placed on the structure: Check. Added to our current homeowner's policy.

We insure that property taxes are paid: 2012 had not yet been paid, with 1st half due by April 1. Made the payment.

Then you start planning and organizing: I created a file to organize all the paperwork. Started a spreadsheet to track expenses and interest (should the previous homeowner choose to redeem). In my research, I found the homeowner's original mortgage was $26,000 at 15.1% interest. Oh my. And according to State Law, should the homeowner redeem, they would have to pay that interest rate on the purchase amount, along with any other expenses I incurred. I also found an IRS Tax Lien on the property for in excess of $24,000, along with several collections and past property taxes. But because the loan foreclosed was in 1st position, these were not an issue. All but the tax lien were wiped out by the foreclosure and the IRS had 120 of the 180 days to redeem.

Now we owned a second home, had 'tenants' living there essentially rent free but no access. Boy - this could be wild ride.