I was the successful high bidder at a foreclosure auction late this spring for a single family home in my neighborhood in Pawcatuck, CT. Actually, I was the only bidder and was able bid one dollar over the minimum bid (which ended up being about half of the bank's recent appraisal of the property). All good right? Well the family seems to have an industrious attorney and is managing to delay and extend the entire process by whatever means necessary. They have filed objections to motions, requests for argument for non-arguable matters, extensions of hearing dates etc. etc. All the while, my hefty cash deposit is tied up pending the approval of the sale by the court. If it is approved, I must come up with the balance of the agreed sale price within 30 days. I'm basically stuck in limbo as I watch other deals come and go. This is my second foreclosure deal in CT. The first one when relatively smoothly and was approved and closed within about 2 months.
My questions for today:
Does anyone else here have foreclosure buying experience in CT? Is there any theoretical limit to the length of time this approval process can take? Are there any probably (or likely) outcomes that will result in the sale agreement being cancelled?
Thanks so much in advance!
@Kevin Scanlon - it sounds like this wasn't a true foreclosure. What info did you get/were given ahead of time?
When you purchase a foreclosure in CT, the bank will have already gone through the court process to sue and take possession of the property. So you are buying the foreclosed property from the bank, which is the owner of said property. There are no steps remaining - no period of redemption, appeal, etc. That has already happened through the courts (hence, "judicial state.").
I do see properties where the bank auctions off an occupied foreclosure and the new owner is in charge of eviction, but it is my understanding that there is no issue with title being passed, merely with getting rid of someone who won't leave.
I'd be interested to hear others' thoughts on this (I'm not a lawyer! So maybe I've missed some little-known loophole or factoid.), as well as more info pertaining to your situation. Does your contract have a time is of the essence clause that might allow you to get out of it if this drags on too long?
@Karin DiMauro - it sounds like the OP bought at courthouse steps ...
Thanks, @Steve Babiak - I'm sure I'm missing something here. Normally there's nothing left to dispute for a property that's considered foreclosed-upon in CT. However, I don't have experience buying on the proverbial courthouse steps.
Thanks guys for getting the discussion going. This is my first post to BP.
In CT, the plaintiff (foreclosing bank) can file a motion for judgement of foreclosure by sale.
If approved, the judge then issues an order that looks like this:
The foregoing, having been considered by the Court, is hereby:
Notice of Judgment of Foreclosure by Sale
Property Address: XXXXX
Judgment of Foreclosure by Sale is hereby entered as follows:
Attorney Fees: $1,850.00
Appraisal Fee: $400.00
Title Search Fee: $225.00
Fair Market Value: $150,000.00
The Sale Date is: Saturday, September 06, 2014
Terms of the Sale: 12:00 noon on the premises.
Deposit Amount: $15,000.00 Deposit to be paid by bank or certified check only.
Committee Appointed: XXXXX
Ordered in accordance with the Statewide Standing Orders(JD-CV-79) and Uniform Procedures for
Foreclosure by Sale Matters(JD-CV-81).
Independent Appraiser: XXXXX
An auction is then held on-premises. If the debt is higher than the value, or if it is too close to be worthwhile for investors, then no bids are submitted and the bank becomes the high bidder and the property becomes bank owned (REO) and will eventually be marketed again post-foreclosure.
Just hope that they can't or don't play the bankruptcy card, because the automatic stay kicks in stopping legal actions such as this.
As to what might lead to cancellation of the sale, grounds for that often can be in the argument that the borrowers weren't properly served of the foreclosure notices as required by law.
So just a quick follow-up if anyone is interested...
During the last court session, the judge heard the defendant's argument. The defendants were able to have the previous judgement (foreclosure by sale) vacated and the sales agreement (my high bid) rejected. The "law day" for the next foreclosure judgement was extended out into February. Meaning that they now have until February to repay all debts and fees associated with the foreclosure. My 10% cash deposit will be refunded by the clerk within a few weeks.
It's not clear from the court records as to what exactly the basis for the judgement was. My guess is that the defendant was able to make the case that there is sufficient equity in the home to cover the debt and fees. The house has been actively listed for sale for the last 2 months.
If anything, this goes to show that if a defendant in a CT foreclosure case is well represented and has a reasonable amount of equity in their home, certain judges may be lenient and provide them ample opportunity to avoid the loss of their home to foreclosure.
Lessons learned / things to consider when bidding on foreclosures in CT:
- Are the defendants represented by an attorney?
- Do the case details indicate a lot of activity by the defendant (objections, continuances, motions to argue, etc.)?
- What is the ratio of debt to equity in the home?
- Are you willing to tie up substantial amounts of cash while things play out?
@Kevin Scanlon My father's family is all in and around Pawcatuck. When I was up a few months ago I was surprised at how many of the houses on Moss St are multi family rentals. How is the rental market up there? I will have first right of refusal on my grandparents home when the inevitable happens.
My grandfather built the house and lived it. I would love to pick it up and keep it in the family, but have no desire to live there. With the deep roots in the area I feel that it will not be an issue to be an out of state owner. After purchasing and rehab would probably be into the house for 200k. After rehab would be a 3/2.
Any ideas if rents in the area would support this? I haven't started research, but could not resist asking when I saw you live in Pawcatuck.
@Andy Norcia Small world! There seems to be a good mixture of single and multi family homes on Moss St. It's a nice little block with mature street trees and well-kept properties.
You could expect to get about $1/sf/mo for a rental around there + or - $0.20. A friend of mine is just finishing up a full rehab of a 2 family a block away from Moss and has leases signed for $1400/ mo for 1150sf 3/2 units. He went pretty high-end with the finishes. I have a remodeled 1050 sf 3/2 with mid-rage finishes about a half mile away leased out for $1250.
At $200k, your family's property may not cash flow very much but you could still enjoy the principal pay-down and potential appreciation.
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