What Is a Sheriff’s Sale?

A sheriff’s sale, sometimes called a “sheriff sale,” is a public auction at which property is repossessed. The proceeds from the sale are used to pay mortgage lenders, banks, tax collectors, and other litigants who have lost money on the property. Sheriff's sales happen at the end of the foreclosure process when the initial property owner can no longer make good on their mortgage payments. They can also occur to satisfy judgment and tax liens.

Key Takeaways

  • A sheriff’s sale is a public auction at which a property is repossessed.
  • The proceeds from the sale are used to pay mortgage lenders, banks, tax collectors, and other litigants.
  • A sheriff’s sale occurs after foreclosure because the owners have defaulted on mortgage payments.
  • Foreclosure proceedings can be initiated by a tax authority, and a sheriff’s sale may occur to satisfy judgment and tax liens.

How a Sheriff’s Sale Works

To understand the steps that precede a sheriff’s sale, you first must understand mortgages and the foreclosure process. A mortgage is a debt instrument that is secured by a specific property. The borrower must meet the obligation of the number of payments agreed to in the contract. Homeowners take out mortgages to leverage a large portion of the cost of their home that they cannot pay upfront. The buyer uses the home as collateral to the lending institution. In the event of a default on the mortgage, the lending institution has a claim on that property.

A foreclosure is a legal act where the property used as collateral in the mortgage document is sold to satisfy the debt when the owner defaults on the mortgage payments. Ownership is then passed to the holder of the mortgage or a third party that has now purchased the property at a foreclosure sale.

Foreclosure proceedings can also be initiated by a tax authority. When income and property taxes go unpaid, the federal government, municipalities, and other tax authorities can attach tax liens to real estate. Whoever attaches the lien to the property now has a claim on that property. If these liens go unpaid, tax authorities can pursue this unpaid debt through the court system and foreclosure proceedings.

The owner of a defaulted property generally has the right of redemption, meaning the owner can regain it by paying in full the lien and associated costs even after it is auctioned off, though the law varies depending on location.

Special Considerations

If the property is sold through a regular foreclosure auction, the lender is usually selling a property it repossessed on its own. However, if the property is to be auctioned off through a sheriff’s sale, the foreclosure cannot take place without authorization from a court. Once the lending institution or taxing authority receives a judgment, the court will issue a directive for the sheriff’s office to auction the property. 

In many states the owner of the defaulted property may be able to regain it—even after the auction—by paying in full the lien and any associated costs. Called the “right of redemption,” this law varies from state to state or even among counties and municipalities.