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If you're researching distressed real estate investing, you'll encounter three overlapping terms: sheriff sale, tax sale, and foreclosure auction. They are not the same thing — and confusing them can cost you tens of thousands of dollars.
The 30-Second Summary
| Feature | Sheriff Sale | Tax Sale | Bank REO |
|---|---|---|---|
| What triggers it | Mortgage default | Unpaid property taxes | Lender took title at auction |
| Who files | Mortgage lender | County tax authority | Bank / mortgage servicer |
| Who runs the auction | County sheriff or clerk | County treasurer | Bank, auction co., or MLS |
| Opening bid basis | Total debt owed | Unpaid taxes + fees | Bank-set asking price |
| Title clarity | Moderate — some liens survive | Low — complex title issues | High — typically clean |
| Inspection access | Almost never | Almost never | Sometimes |
| Redemption risk | 0–12 months (state) | High — often 1–3 years | None |
| Typical discount | 20–50% | 30–60% (higher risk) | 5–20% |
Sheriff Sales: Mortgage Foreclosure Auctions
A sheriff sale is the end result of a judicial mortgage foreclosure. When a homeowner stops paying their mortgage, the lender files a lawsuit in county court. If the court rules for the lender, it orders the property sold at public auction — administered by the county sheriff.
What do you actually buy?
You're purchasing whatever ownership interest the defaulting borrower held — along with any liens that survive the foreclosure. The foreclosing mortgage is satisfied by the sale. Junior mortgages are typically extinguished. But property taxes, IRS liens, and municipal liens commonly survive.
Who should target sheriff sales?
Investors who want a relatively defined lien environment, can tolerate no inspection access, have capital ready for quick payment, and are comfortable with moderate title risk. The discount potential is significant — especially in distressed markets.
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Tax Sales: Property Tax Delinquency Auctions
A tax sale is initiated by the county government when a property owner fails to pay property taxes. No mortgage lender is involved. There are two distinct types:
| Type | What You Buy | Your Risk | Your Return |
|---|---|---|---|
| Tax Lien Sale | A certificate (lien) on the property — not the property itself | Owner may redeem by paying taxes + your interest | Interest return (8–36% by state) if redeemed; foreclose if not |
| Tax Deed Sale | The actual property — county already foreclosed | Title is often severely clouded; title insurance difficult | High equity discount — but significant legal cleanup |
Why tax sales have higher title risk
Tax deed properties often come with severely clouded title. Prior owners may challenge the sale. Other lienholders may not have been properly notified. Title insurance companies frequently refuse to insure for years after purchase. Clearing title often requires a quiet title action — a court proceeding adding months and thousands in legal fees.
Tax Deed Warning
The deep discounts at tax deed sales are real — but so is the title risk. Don't buy a tax deed property expecting to flip quickly. Build in time and budget for a quiet title action.
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REO and Bank Foreclosure Auctions
REO (Real Estate Owned) means property the bank now owns because nobody outbid them at the sheriff sale. REO properties are then sold through MLS listings or specialized auction platforms.
| Feature | Sheriff Sale | Bank REO Auction |
|---|---|---|
| Title | Sheriff's Deed — some liens survive | Typically clean — bank clears title |
| Inspection | Almost never | Often available |
| Financing | Cash-only in most cases | Sometimes available |
| Competition | Local investors, courthouse regulars | National investors, funds, retail buyers |
| Discount potential | High — 20–50% | Moderate — 5–20% |
How Lien Priority Changes Everything
The general rule: first in time, first in right. Liens prioritized by recording date. When a senior lien forecloses, junior liens are typically extinguished. But several categories have super-priority status by law — they survive regardless of recording date.
Always Survives Regardless of Sale Type
Property taxes, IRS federal tax liens (with 120-day redemption right), and municipal water/sewer liens in most states carry super-priority status and survive the sale — becoming the new owner's liability.
Which Type Is Right for You?
| If you are... | Consider starting with... |
|---|---|
| New to distressed investing, want lower risk | Bank REO auctions — cleaner title, sometimes inspection access |
| Experienced, comfortable with title risk | Sheriff sales — higher discount, manageable lien environment |
| Patient, want yield without owning property | Tax lien certificates — interest income without property headaches |
| Sophisticated, have legal support | Tax deed sales — highest risk, highest potential discount |
SheriffIQ focuses on sheriff sales — the sweet spot of discount potential and manageable due diligence for experienced investors.
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This article is for informational purposes only and does not constitute legal or financial advice. Sheriff sale laws vary significantly by state and county. Always consult a licensed real estate attorney before participating.