Gambling at a Sheriff’s Sale

Are you considering purchasing real property at a sheriff’s sale? That’s a gamble that may or may not pay off. These properties are sold “as is” with no warranties, and prospective bidders generally do not even have the opportunity for an inspection. If you do purchase real property at a sheriff’s sale, is there recourse if the property provides more burden than benefit? If you complied with all the conditions of the sale, no.

In a recent opinion from the Superior Court of Pennsylvania, (Commonwealth of Pennsylvania v. Investment Resource Holding, Inc., 2017 WL 3261289 (Aug. 1)) a purchaser found this out the hard way. He purchased a property at tax sale in September and complied with all the conditions of the sale. A deed was prepared and recorded in November. In December, a fire caused extensive damage to the property. The purchaser was not in receipt of the deed at that time of the fire and subsequently refused to accept the deed when it was delivered. Eventually, he was charged with violations of the city’s Property Maintenance Code for failure to repair the fire damage. The purchaser claimed that because he did not accept the deed on delivery, he had unilaterally rescinded the purchase of the property. The court did not accept his argument, quoting, “(t)he bona fide purchaser at a public sale of land, the moment it is knocked off to him, if he complies in all respects with the conditions of sale, instantly acquires a vested right to the property sold.” Russell v Equibank, 8 B.R. 342 (Bankr.W.D.Pa. 1980). “Pursuant to Pennsylvania law, a purchaser of real property at a sheriff’s sale acquires, at the fall of the hammer, a vested interest in the property.” Marx Realty & Improv Co. v. Boulevard Center, Inc., 398 Pa. 1, 156 A.2d 827 (1959). As a result, the purchaser was liable for the fines and still had to repair the damaged property. His gamble did not pay off.

The flip side of the scenario also applies. Sometimes the property may be worth more than what is paid at sheriff’s sale, and that is when the gamble pays off.