Legal Definitions - certificate of purchase

A certificate of purchase is a legal document issued to an individual or entity that has successfully bought property at a court-ordered or court-supervised sale, commonly known as a judicial sale. This certificate serves as proof of the buyer's winning bid and their right to eventually receive the official property deed.

It is important to understand that a certificate of purchase is not the final deed itself. Instead, it acts as an interim document. There is often a waiting period during which the original owner might have the legal right to "redeem" the property (by paying off the outstanding debt or taxes) or the court must formally confirm the sale. If these conditions are met and the property is not redeemed, the holder of the certificate of purchase will then be entitled to receive the actual property deed. This document is sometimes also referred to as a certificate of sale.

Here are some examples to illustrate how a certificate of purchase works:

• Tax Foreclosure Sale: Imagine a situation where a homeowner has failed to pay their property taxes for several years. The county government initiates a tax foreclosure process, and the property is put up for public auction to recover the unpaid taxes. An investor attends the auction, submits the highest bid, and successfully purchases the property. Upon payment, the county treasurer's office issues the investor a certificate of purchase. This document confirms the investor's winning bid and their right to the property, subject to a statutory redemption period during which the original homeowner could still pay the back taxes and reclaim their property. If the homeowner does not redeem within that period, the investor will then receive the official property deed.

• Mortgage Foreclosure Sale: Consider a scenario where a bank forecloses on a house because the homeowner has stopped making mortgage payments. The court orders a sheriff's sale, which is a type of judicial auction, to sell the property. A real estate developer participates in the auction and submits the winning bid. After the developer pays the purchase price, the sheriff's office provides them with a certificate of purchase. This certificate serves as proof of the developer's successful acquisition at the foreclosure sale and establishes their claim to the property, pending any post-sale court confirmation or legal challenges. Once all conditions are met, the developer will be issued the property deed.

• Bankruptcy Estate Sale: Suppose a business declares bankruptcy, and as part of the bankruptcy proceedings, the court orders the sale of a commercial building owned by the business to pay off creditors. A competing business bids on the building at the court-supervised auction and wins. The bankruptcy trustee, acting under court authority, issues the winning bidder a certificate of purchase. This certificate acknowledges the business's successful bid and its right to the commercial building, contingent on the bankruptcy court's final approval of the sale and the expiration of any appeal periods. After the court's final order, the business will receive the deed to the property.