Sheriff's Sale

[dmccarty]

Liens will normally be wiped out by the foreclosure (with some exceptions); however, sometimes properties are sold subject to liens especially if the lender has a second mortgage they are foreclosing.

This is real important. We knew of a property about to be sold at the court house. We talked to a couple of lawyers about the situation and their bottom line was to wait until the property had gone into foreclosure since the liens would be removed. If we became involved prior to foreclosure the liens would be ours....

In the end we just stayed away for a whole bunch of reasons.

Later,
Dan

 

[dooleysm]

I initially attempted to work out a short sale, the bank was not interested. What I was offering was to come to the Sherrif's sale and bid on the property for what it was worth, nothing more. The bank started the bidding at well over double what the property was worth, as evidenced by them selling it a year later for much closer to it's market value.

Had the bank taken me up on my offer they would have saved a year's worth of taxes, maintenance (that I know of, they paid someone to mow it all last season, they paid for a load of gravel, and they had a 20 yard dumpster there for a few days), insurance (presumably), interest (on the money they had tied up in the property), and realtors fee ($2100 according to the settlement sheet at closing). They may or may not have had reason(s) for playing it like they did.

I'm no real estate or financial wizard, but a simple reality check told me that the property could not be worth anywhere near $54,500.

 

[dmccarty]

...
I'm no real estate or financial wizard, but a simple reality check told me that the property could not be worth anywhere near $54,500.

But if they found a buyer then it was worth the price.

When we bought our land, we sold off three lots, roughly 15 acres to someone we know. They started to build a house and then decided to get divorced. The land and house came within days of being foreclosed. They found a buyer for the 10 acres just in time to stop foreclosure. The new buyers paid at least 2-3 times what the sellers paid a year previously. That sounds like the buyers got ripped off but they did not. We bought the land cheap and the price was still less than a lot on the property line.

The house was maybe 90% completed. I knew almost to a penny what had been spent to build the house. A buyer bought the house for more than it was "worth" and assumed quite a bit of risk in the process due to liens, mold, a bit of water damage, etc. We walked away from the house because of the risk and these other issues.

In the end the owner and the bank did not go to foreclosure but only by the skin of their teeth. It was just a matter of days.

Sometimes you win. Sometimes you loose. In this case the sellers and the bank did not take a huge loss. Maybe broke even or made a bit of money.

Later,
Dan

 

[Pops15]

I initially attempted to work out a short sale, the bank was not interested. What I was offering was to come to the Sherrif's sale and bid on the property for what it was worth, nothing more. The bank started the bidding at well over double what the property was worth, as evidenced by them selling it a year later for much closer to it's market value.

Had the bank taken me up on my offer they would have saved a year's worth of taxes, maintenance (that I know of, they paid someone to mow it all last season, they paid for a load of gravel, and they had a 20 yard dumpster there for a few days), insurance (presumably), interest (on the money they had tied up in the property), and realtors fee ($2100 according to the settlement sheet at closing). They may or may not have had reason(s) for playing it like they did.

I'm no real estate or financial wizard, but a simple reality check told me that the property could not be worth anywhere near $54,500.

The owner has to be a willing participant in a short sale. You said the owner wasn't willing to pay any more. Sometimes a short sale includes the owner paying some of the shortfall.

Also keep in mind that real estate prices dropped like a rock during that period.

Banks are very good at making decisions that benefit them.
They didn't really pay 54500. They just kept someone else from buying it for less than that at the Sherriff's sale. At worst they're just out the commission, a little interest and some maintenance costs.

I think you missed the point that they couldn't sell the property until they bought it at the sheriff sale. Even once they've foreclosed a property their hands can be tied by laws on how they dispose of the property.


JohnboyMD made some excellent points.

 

[2manyrocks]

Banks are very good at making decisions that benefit them.
They didn't really pay 54500. They just kept someone else from buying it for less than that at the Sherriff's sale. At worst they're just out the commission, a little interest and some maintenance costs.

The bank is entitled to credit bid what is owed on their loan. However, if the outstanding principal balance on the loan was $50,000 plus $4,500 in past due interest, then the bank was out $50,000 plus the commission, lost interest and maintenance costs netted against what they ended up selling the property for. So it's possible they actually lost $20-$25K on a $50k loan.

Dan's situation is bit unique in that he knew the problems with the property he was considering buying and apparently knew what dollars had been sunk into it. In most foreclosures, you don't know what the inside looks like until you've bought the thing. So not so many independent bidders are going to climb out on that limb unless they know about the interior or are getting the property cheap enough that there is enough cushion to deal with problems and still come out.

 

[Pops15]

The bank is entitled to credit bid what is owed on their loan. However, if the outstanding principal balance on the loan was $50,000 plus $4,500 in past due interest, then the bank was out $50,000 plus the commission, lost interest and maintenance costs netted against what they ended up selling the property for. So it's possible they actually lost $20-$25K on a $50k loan.

Dan's situation is bit unique in that he knew the problems with the property he was considering buying and apparently knew what dollars had been sunk into it. In most foreclosures, you don't know what the inside looks like until you've bought the thing. So not so many independent bidders are going to climb out on that limb unless they know about the interior or are getting the property cheap enough that there is enough cushion to deal with problems and still come out.

They probably did lose a chunk on the deal, but they didn't actually "pay" 54500 at the auction. They likely bid what they were owed. Basically traded paper to protect their investment as much as they could.

 

[Alan L.]

I have no expectation that she would sell the place for less than she has in it, I never asked her to do that because I knew she wouldn't accept that kind of offer. The way the economy is right now, many folks are facing having to sell properties for less than they have in them. Instead, most are going the same route as this lady, foreclosure.

My BIL works with her and asked her about the property for me. She told him what she owed on it, that she had been to the bank and told them she wasn't going to pay anything else on it, they froze her accounts, and that she would sell it to me for what she owes. My father went to the courthouse and looked up which bank she had her mortgage through and what amount her mortgage was. That is public information, available for anyone to see.

I believe that the 10 year old double wide, with significant shingle damage since last September, and completely neglected and abandoned for the past 6 months or so is not worth what she owes on it. Nowhere near that in fact. It's possible that it's worth more to someone else than it is to me, but probably not by much.

In general, I think that bank's (not just the bank I've been trying to deal with, but the banking system in general) unwillingness to deal with their debtors is a big reason we're in this mess. The bank is going to take a hit on this property, no two ways about it. I was offering to help them get this property off their books right now; as opposed to going through foreclosure, paying their lawyer, going to the sheriff's sale, paying a realtor, paying for fixes, and carrying this debt for the next X number of months. I feel like it was a bad decision on their part to not deal with me. I was bringing cash to the table and willing to make what I felt was an attractive offer to them.

If you feel like I've done something shady or underhanded, that's you opinion. I certainly don't feel that I have.

You can't buy a house from a lender. They don't own the house. They would have to foreclose first before they could sell it.

 

[two_bit_score]

The bank is entitled to credit bid what is owed on their loan. However, if the outstanding principal balance on the loan was $50,000 plus $4,500 in past due interest, then the bank was out $50,000 plus the commission, lost interest and maintenance costs netted against what they ended up selling the property for. So it's possible they actually lost $20-$25K on a $50k loan.

Dan's situation is bit unique in that he knew the problems with the property he was considering buying and apparently knew what dollars had been sunk into it. In most foreclosures, you don't know what the inside looks like until you've bought the thing. So not so many independent bidders are going to climb out on that limb unless they know about the interior or are getting the property cheap enough that there is enough cushion to deal with problems and still come out.

I think you are forgetting about the morgage insurance that the bank probably collected.

 

[greasemonkeyok]

two-bit-score has the correct answer. Banks won't do a short sell to a third party if they have credit insurance on the note because insurance will not pay the bank under those circumstances.

 

[2manyrocks]

Odds are there was no credit insurance.