The Ins and Outs of US Marshal Sales
The US Marshals provide open auctions for seized assets and forfeited property, including real estate. Like with a Sheriff’s Sale, proper precaution must be taken when purchasing property at auction. When done with caution, you can purchase an investment property at a significantly reduced price.
Read this guide to learn more about US Marshals auctions and what to expect.
What is a Marshals Real Estate Auction?
The US Marshal serves as the “armed wing” of the US Federal Court system. Just as the sheriff enforces orders for the Court of Common Pleas and the constable enforces orders from the Magisterial District Judges, so the Marshal enforces court orders for the Federal Courts. Here in Pennsylvania, we have three federal districts, the Eastern, Middle, and Western District, with each district having its own Marshal. Lancaster County is in the Eastern District, while interestingly enough, Lebanon County is in the Middle District.
As far as real estate is concerned, the Marshal sells real estate at US Marshals sale. Practically speaking the vast majority of real estate sold by the Marshal is from foreclosures brought by the USA through the USDA direct lending program. A list of properties, along with the minimum bid, are advertised on the USDA website and in the legal classified section of the local newspapers. The ads in the papers are easy to miss so monitoring the website should be a priority. The link to the website is here
3 Difference Between Sheriff & Marshal Sales
Marshal sales are like Sheriff’s sales in that junior liens are wiped out, but are different in several important respects. The Marshal does not pay water, sewer or trash; you will need to contact the provider at least a couple of days ahead of the sale. Often you will need to fax requests and/or send payment to the provider. Getting this information at the last minute can be problematic. Second, the Marshal does not pay delinquent or current years real estate taxes. Thirdly, a federal judge need to confirm the sale prior to the deed being issued. Confirmation can take months. A recent sale we were involved in took seven months to confirm. A common issue is that taxes and utilities continue while waiting for confirmation. It is up to you to decide if you want to pay them in discount while waiting for confirmation or let them go into penalty/lien status until you receive the deed.
Additional Details about a US Marshals Sale
The Marshal does not record the deed. You will receive the original deed in mail. It is up to you to record the deed at the county recorder of deeds office and pay the transfer tax. It is important to record the quick immediately because the 91-day FHA anti-flipping timeframe begins when the deed is recorded, not when the sale occurred.
In the past the USDA did not winterize the properties or manage them in any way. Generally, investors were able to get in the properties and work on them while waiting for confirmation. Recently however, a property management company contacted the successful buyer after the sale to find out who was occupying the property. The management company backed off when they were advised that the former owner had surrendered possession of the property to the investor. That said, we don’t know if the USDA is now managing some or all of the properties it is foreclosing on.
If you buy an occupied property, you are going to need to wait until you receive the deed prior to filing for ejectment, just like a sheriff sale property. The ejectment can be brought in the Court of Common Pleas, not in federal court.
The terms of sale are normally 10% down by certified check and the balance due within 10 days of confirmation. There is an interesting issue regarding transfer tax. Call us if you want to discuss transfer tax issues.
Questions about Marshal Sales?
If you have specific questions about purchasing property at a US Marshals Sale, contact the real estate attorneys at Clymer Conrad. Another helpful source is Jillian Hill, a paralegal at KML Law Group in Philadelphia, who seems to be in charge of all US Marshal sale in the Eastern and Middle Districts of Pennsylvania.