Cert. of sale: what is it?

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A certificate of sale is a court-issued document awarded to the winning bidder at a foreclosure auction. These types of certificates are unique elements of United States law, and the terms and conditions for issuing a certificate of sale generally vary by state. In almost all cases, a certificate of sale authorizes the bearer to take possession of the named property as of a certain date. How that date is calculated, as well as the terms and conditions that must be met before a certificate can become a deed, are generally matters of local law.

Mortgages are popular ways for people to finance a home purchase. They are essentially long-term loans, repayable in monthly installments. In a foreclosure situation, the mortgage lender, usually a bank or other financial institution, provides the money upfront to purchase the home in exchange for a lien on the title. If payments are missed, the lender can foreclose to recover the remainder of your initial investment. Selling the foreclosed property at a foreclosure sale is one way for a lender to raise these funds.

Foreclosure sales are generally conducted by the courts or by a county sheriff closely associated with the courts. Most of the time, the sale is by public auction. The highest bidder must generally be able to pay the winning bid price in cash at the time of the auction, or within a finite period of time thereafter. If the bidder presents the money to support his offer, he is issued a certificate of sale.

The certificate generally does not entitle the bidder to take immediate possession of the premises, nor does it establish ownership as a deed or title would. Rather, it simply indicates that the property has been sold and the offeror is first in line to claim it. The offeror generally must wait until the final terms of the transfer are resolved by the court and the mortgagor to assume physical ownership. Legal documents that solidify that the property will come once those agreements have been made.

A certificate of title may, in some places, be trumped by the original owner’s right of redemption. Some states give the original owners a certain amount of time after a foreclosure to remedy the problem, and get the money to pay off the mortgagor. This is known as a “right of redemption.” Not all states have redemption rights, but in those that do, the amount of grace time can be anywhere from a few weeks to a few years. A long redemption right can make owning a certificate of sale a risky investment.

It is important to distinguish a certificate of sale from a retail certificate, which corresponds to taxes, and a bill of sale, which corresponds to direct transfer of ownership. Retail sales certificates are issued by retailers, primarily car dealers, at the point of sale. They are generally designed to show that sales tax was paid on the purchase price. A bill of sale is essentially an instrument of transfer of title through which one owner transfers ownership directly to another by conveying title to the property. Certificates of sale, on the other hand, are unique to the mortgage and foreclosure space.

Smart Asset.

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