Ohio Foreclosure Law Changes
The changes bring advantages to investors who take the time to understand them.
If you want to invest in foreclosed properties in Ohio, you should know about changes the state made a few years ago to its foreclosure law. The changes make it easier for investors to buy foreclosed properties. But, you have to know where to look and how the process works to take full advantage of the changes.
First, Some Background
In a judicial foreclosure state like Ohio, the property securing the loan cannot be offered for sale to the public until the court has entered a decree of foreclosure and issued an order of sale.
The order of sale was traditionally issued only to the county sheriff. The mortgage foreclosure crisis revealed the weakness of this. Put simply, many sheriffs were not equipped from a staffing and technology standpoint to keep up with an ever-increasing volume of sale orders. The result was a large backlog of unsold properties. In some counties in Ohio, it was taking a year or more for the sheriff to sell the property.
The backlog hurt Ohioans by contributing to neighborhood blight. Lenders were hurt because the delays in getting properties sold increased the cost of foreclosure. This was a political problem; both sides of the aisle wanted a solution. Members of the Ohio General Assembly asked the Ohio State Bar Association to form a group of interested persons and propose a legislative solution to the problem.
Two Significant Changes
After many meetings and much debate, the group agreed upon a solution that became law at the end of 2016. The law made significant changes to the foreclosure sale process.
First, the law made it easier for judges to issue orders of sale to private auctioneers (technically, “private selling officers”) instead of the county sheriffs. The law did so by defining a process for private foreclosure auctions and filling in gaps that had existed in Ohio’s code. This brought certainty to the transfer of title by a private auctioneer in a foreclosure action.
Second, the law requires sheriff sales to be brought into the modern era by creating a five-year timeframe for sheriffs to conduct auctions online. The law also eliminated local inefficiencies that had developed over the years. Notably, sale deposits were made uniform across the state, and sales could be postponed to a new date without having to meet the appraisal and publication requirements again.
Political Compromises
The solution included some political compromises. Judges wanted discretion over whether a private auctioneer could sell the property. The result is that the use of a private auctioneer happens on a case-by-case basis. Some judges flatly prohibit the use of a private selling officer. As a result, even when plaintiffs in foreclosure cases prefer to use a private selling officer, in some cases they have no choice but to use the sheriff.
Sheriffs did not want to lose control over the appraisal process, so that process is still under their control. Sheriffs also did not want to lose control over sale publications, so private selling officers must use the sheriff’s preferred newspaper for the public notice of the sale.
Finally, sheriffs wanted time to phase in their use of an online auction platform. Ohio has 88 sheriffs. Each sheriff has until September 2022 to conduct auctions online at www.realauction.com, the vendor chosen for online sheriff auctions. To date, the Franklin County Sheriff is the only one who has made the transition.
The result is an imperfect but effective law. The backlog of unsold properties at the county sheriffs’ offices is gone. There is no reason why such a backlog should ever happen again since private auctioneers can now step in to help. The movement to online sales is also bringing the foreclosure sale process into the modern era.
Understanding the Process
With that as background, the question is: Where can you find foreclosure sales in Ohio today and how does the process work?
It depends on who is conducting the auction—the sheriff or a private selling officer. In 87 of Ohio’s 88 counties, the sheriff still holds live auctions. The location, date and time of each auction are published in the local newspaper and posted to the sheriff’s website.
Franklin County holds its sales at www.realauction.com. All private selling officer sales are held online. The two main websites for these sales are www.auction.com and www.privatesellingofficer.com. These websites allow you to sign up for alerts about upcoming auctions. Some private selling officers also advertise their foreclosure sales on real estate websites or social media platforms.
An online foreclosure auction conducted by a private selling officer has advantages over a live auction conducted by a sheriff. Here’s why:
- First, searching for properties is easier if the
auction is online.
- Second, you can bid remotely in an online
auction, including from a mobile device, which reduces your cost of bidding and
the hassle of sale cancellations.
- Third, whereas live auctions conducted by a
sheriff move quickly—sometimes taking less than 60 seconds per property—online
auctions must be open for bidding for at least seven days. So, there is less
chance you will miss an auction.
- Fourth, if the auction is conducted by a private
selling officer, a title company will handle all funds and record your deed.
Title companies are usually much quicker than county sheriffs at doing these
things.
- Finally, private selling officers are available to field questions about how the process works.
The process includes unique risks no matter who conducts the auction. You have no right to inspect the property since the owner still owns it. Private selling officers and sheriffs have no authority to give you access to the property. Properties are sold as-is with no contingencies. Each sale must be confirmed by the court.
The confirmation requirement, which takes 30-60 days on average, can be surprising news to investors who are used to buying REO properties. Once the sale is confirmed, you will have 30 days to pay the balance due. After that, your deed will be recorded and you can, if all goes well, start to profit from your new investment.
