Introduction
When homeowners fall behind on their mortgage payments or fail to pay property taxes, one possible consequence is a sheriff sale—a type of public auction where the property is sold to the highest bidder. While it might seem straightforward, many people wonder: Who gets the money from a sheriff sale?
In this article, brought to you by ABL Houses, we’ll break down the entire sheriff sale process and explain where the money goes, who benefits, and what it means for the former homeowner, the lender, and other parties involved.
What Is a Sheriff Sale?
A sheriff sale is a court-ordered auction of a foreclosed property. These sales are typically conducted at the county level and are overseen by the sheriff’s department. They’re used to recover unpaid debts such as mortgages, property taxes, or unpaid homeowners association fees.
The goal of the sale is to satisfy a debt by selling the property to the highest bidder.
Why Sheriff Sales Happen
Sheriff sales happen when:
- A homeowner defaults on their mortgage payments.
- Property taxes remain unpaid for an extended period.
- A court judgment is awarded to a creditor.
Once the lender or lienholder has exhausted other collection efforts, they may file a foreclosure lawsuit, and if approved, the court will authorize a sheriff sale.
Who Can Attend and Bid at a Sheriff Sale?
Sheriff sales are public auctions, which means anyone can attend, including:
- Real estate investors
- Individuals seeking bargain properties
- Other lenders
- Competing creditors
Bidders typically need to pay in cash or certified funds, and properties are sold as-is, often with limited information available about their condition.
The Sheriff Sale Process: Step-by-Step
To fully understand who gets the money from a sheriff sale, let’s walk through the typical process:
-
Default and Legal Action
The lender or creditor initiates legal proceedings due to unpaid debt. -
Foreclosure Judgment
A court reviews the case and issues a foreclosure judgment if the borrower is found liable. -
Sale Notice and Auction
The sheriff’s office schedules the property for auction. Public notices are published online and in local newspapers. -
Bidding and Sale
The auction takes place, and the property is sold to the highest bidder. -
Funds Collected and Distributed
Here’s where things get interesting: the money collected from the winning bidder is not just pocketed by the lender. It is distributed among multiple parties based on priority and legal rights.
So, Who Gets the Money from a Sheriff Sale?
Let’s break it down by priority:
1. Sheriff’s Office and Administrative Fees
First and foremost, the sheriff’s office deducts any fees related to the auction process:
- Advertising costs
- Administrative costs
- Legal filing fees
These expenses are covered before any creditors are paid.
2. Primary Mortgage Lender or Judgment Creditor
The next in line is usually the primary mortgage lender—the one who initiated the foreclosure process. They are entitled to recover the outstanding balance of the loan, which includes:
- Principal amount owed
- Accrued interest
- Attorney fees
- Late charges
However, if the final bid amount does not cover the total debt owed, the lender may not receive the full amount. This may result in a deficiency judgment against the borrower.
3. Secondary Lienholders or Junior Mortgages
If there is money left after the primary lender is paid, it goes to secondary lienholders, which may include:
- Second mortgage lenders
- Home equity line lenders
- Mechanics liens
- HOA liens
These lienholders are paid based on priority, which is typically determined by the order in which the liens were recorded.
4. Government or Tax Liens
Government agencies, such as the IRS or local tax authorities, may also have claims on the property. Tax liens typically take precedence over most other liens, except administrative or legal costs.
5. The Former Homeowner (Borrower)
Surprisingly to some, if all debts and fees have been paid and there’s still money left over, that remaining amount goes to the former homeowner.
This is called “excess proceeds” or “surplus funds”, and it must be claimed through a legal process. Unfortunately, many homeowners miss out on these funds due to lack of awareness or failure to file the appropriate paperwork.
Real-World Example
Let’s say a home is auctioned at a sheriff sale for $200,000. Here’s a possible distribution breakdown:
- Sheriff’s administrative costs: $5,000
- First mortgage lender payoff: $150,000
- Second mortgage lender: $25,000
- Unpaid property taxes: $10,000
- Remaining balance: $10,000
That final $10,000 goes to the former homeowner, assuming no other liens exist.
What Happens If the Property Sells for Less Than the Debt?
Sometimes, sheriff sales don’t bring in enough money to cover the total debt. In such cases:
- The lender may file for a deficiency judgment.
- The borrower remains liable for the unpaid balance.
- Junior lienholders usually get nothing if the senior debt isn’t fully satisfied.
This is why lenders try to buy back the property themselves at the sale (a process known as credit bidding) to regain control and potentially resell the home later.
What Happens If There Are No Bidders?
If nobody bids on the property, the lender will typically acquire it using a credit bid, meaning they “buy” it without transferring cash—just by erasing the amount of the owed debt.
This results in a bank-owned property (REO – Real Estate Owned), which the bank may:
- Sell through a real estate agent
- Hold in inventory
- Auction at a later date
In these cases, no money changes hands, so the question of “who gets the money” doesn’t apply in the traditional sense.
Can Homeowners Reclaim Their Property After the Sale?
Depending on the state, some homeowners may have a “redemption period” after the sheriff sale, which allows them to:
- Repay the full amount owed
- Reclaim ownership of the home
During this time, the winning bidder cannot take full possession until the redemption period expires.
However, not all states offer redemption periods, and timelines vary from 30 days to 1 year.
What Role Does ABL Houses Play?
At ABL Houses, we specialize in purchasing distressed properties, including those heading to or already involved in sheriff sales. Our mission is to:
- Help homeowners explore options before losing their homes
- Buy properties fast for cash, providing quick relief
- Assist in understanding legal rights and financial outcomes
Whether you’re a homeowner facing foreclosure or a buyer interested in sheriff sale properties, ABL Houses offers the knowledge and resources to guide you through the process with confidence.
Common Misconceptions About Sheriff Sales
Let’s clear up a few myths:
❌ “The bank keeps all the money.”
Not true. The bank gets what it’s owed—after administrative fees—and only if the sale amount covers their debt.
❌ “Homeowners can’t get anything from the sale.”
Wrong again. If there’s money left over after all liens are paid, the homeowner is entitled to the surplus.
❌ “All liens are erased after a sheriff sale.”
Some liens, like tax liens, may remain attached to the property. It’s important for buyers to do due diligence before bidding.
Final Thoughts
The question of “who gets the money from a sheriff sale” isn’t just about banks and creditors—it’s about a priority system rooted in legal rights and financial order. Everyone from the sheriff’s office to the homeowner may be entitled to a piece of the pie, depending on how much the property sells for and what liens exist.
At ABL Houses, we believe in transparency, support, and helping people make smart decisions whether they’re selling, buying, or navigating complex real estate situations like sheriff sales.
Need Help Understanding Your Options?
If you’re facing foreclosure, have questions about sheriff sales, or want to sell your house fast without stress, ABL Houses is here to help.
📞 Call Us Today or
💻 Visit ABLHouses.com to get started with a free consultation.