Sheriff's Sale

[dooleysm]

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.

If the banks were to write down mortgage balances for everyone whose house is worth less than the outstanding mortgage balance, where would the write downs end?

If banks write down mortgages for customers who quit paying their mortgages, what are the customers who make their payments going to say? If anything, looks like they'd want to reward the customers who actually pay their bills.

I can't imagine that writing down upside down mortgages would have ended any worse than sending them all to foreclosure has. Since we're already in a mess, I would think the banks would be ready to try something different.

But we're getting close to politics with this tangent, so I'll end my comments there.

I see your point and I feel like my case is different. The bank knows that they aren't getting any more money out of the current owner. I know that the bank knows this and I told them as much. I asked them if they would be willing to negotiate a solution that would release the current owner from her obligation and transfer the deed to me, in exchange for some amount of money less than her current payoff. At the very least this would require the signature of the current mortgage holder. I completely understand that.

I am planning to contact the sheriff's office soon to find out the deal with sheriff's sales. If I buy am I guaranteed a free and clear title? I realize I won't get to see the inside of the trailer, and I really don't care. The price I am willing to pay is based on what the land is worth to me.

 

[2manyrocks]

Whether the title conveyed at a Sheriff's sale is a good title with any warranties of title depends on local Indiana law. Generally, a foreclosure sale results in a trustee's deed with no warranties. It is more akin to a quitclaim deed than anything else.

 

[dooleysm]

Here's a followup on this...

That property eventually went through the Sheriff's sale about a year ago. I tracked down a guy at the bank to talk to about this. He had a much different opinion on the value of the property than I did. My wife went to the sale and the guy from the bank started the bidding at $54,500. Nobody else bid on it.

I watched the property over the past year. I saw somebody there mowing it all year. I saw 1 tri-axle of rock come in and get dumped on the drive. I saw a 20-yard dumpster up there for a few days. That was about it.

Several weeks ago on a Thursday evening I noticed For Sale signs in the yard. I called the next morning and put in an offer. My offer was finally accepted and I am closing on the property at 4:15 this afternoon.

$25,000 for 2 acres with a 10 year old double-wide in terrible condition. It's on the higher end of what I wanted to pay, but I don't think I'll regret it.

 

[Joe H]

I went through something similar with Bank of America. It's amazing what they will go through to screw themselves and you too if it can be done instead of just taking the offer.
Glad you came out on top, Joe H

 

[2manyrocks]

The bank was trying to recoup what it had loaned, and when that didn't work, they sold it for what they could get. Plus, one has to wonder what shape the bank that sold it is in themselves.

If the bank has public stock, you could look up their financial statement and see if they have lost money for the past couple of years.

One bank I read about had their bad loans increase from 75 million in 2009 to 150 million in 2010. Not good for their stockholders.

 

[dooleysm]

It was a small local bank that held the note on this property. That is what made it more confusing to me when they wouldn't initially deal with me. There's nothing special about this area that somehow exempted us from the terrible housing market that's been going on for years now. It sure seemed obvious to me a year ago that a doublewide in terrible condition on 2 acres in the middle of nowhere was not worth $54,500. I would have thought a bank repo person would have been just as aware of this.

In the end though, I think it worked out for me. I just have to figure out what to do with this thing. I'm not sure if I can get any money out of the trailer or not. It still has an oven, water heater, and furnace in it. They might be worth a few bucks. Maybe copper wiring if I'm lucky. And presumably a steel frame under it. I'm not sure if anything else is worth anything for scrap.

 

[bdeboer]

If I understand it correctly the bank is trying to collect its "PMI". That is the mortgage insurance, and therefore the bank usually has a set amount they will go to at the sheriff's sale. As a result the dollar amount at the sheriffs sale usually has nothing to do with current value if the bank is purchasing it back.

The bank will buy back if it is in their best interest.

In this area if there are 15 properties at auction banks will buy 8 back, 6 will be withdrawn at the sale, and 1 will private sale.

 

[JohnBoyMD]

What the bank bids on a property depends on a number of factors, including how much they are owed and how much they believe the property is worth. Some of the decision is driven by the local laws that require certain bidding strategies for the bank in order to preserve their ability to pursue the previous owner for the deficiency balance (what's owed after they sell the property). In some places, the bank can bid $100 if nobody else bids on the property. This greatly reduces the transfer tax they have to pay. Other places don't allow this type of bid.

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. Be sure to listen to the announcements by the auctioneer/sheriff before the property is sold. If you don't understand them or have questions, do yourself a favor and don't bid on the property. It could turn out ot be a very expensive lesson. It is always a good idea to get a title search before bidding on a property and so is requiring a warranty deed.

 

[2manyrocks]

Sometimes the bank is trying to avoid a write down of value on its books until they have earnings elsewhere to cover the write down. The smaller the bank, the more they seem focused on how the sale is going to affect their reserves for bad loans and their net income figures. You wouldn't think a bank would be that concerned over a $50K loan, but sometimes you have a loan officer trying to CYA after the fact for making an idiot loan in the first place. Then finally higher mgt figures out what they've actually got and tells the guy to cut it loose.

Usual procedure is for the bank to get the property back. Get an appraisal. Try to sell it. Not sell it. Finally adjust to reality and take what's offered. If a property was worth what was owed, you've got to figure the borrower would sell it in order to get their equity out. In a typical foreclosure before the current market meltdown, there was usually something amiss with the borrower's management or the property itself that the borrower couldn't sell it.

 

[Pops15]

It's not that the bank wouldn't work with you. They couldn't. Until they foreclose, they don't have a right to sell it. Then there are laws saying how they can sell it. If the bank was able to do what you wanted, the property would have been bought by a relative or friend of the banker for well below market value. Since the original borrower could still be on the hook for the difference between what the bank sells the property for and the amount of the mortgage there are laws governing how banks have to handle things. They handled it correctly.

For the bank to sell to you prior to them foreclosing, you, the owner, and the bank would have needed to negotiate a short sale....and technically the bank wouldn't be the seller.