HI BP, I am a newbie interested in investing at sheriff sales, and I have went to a few in my area, Somerset County, NJ to see what happens.
1- Can someone help me understand the difference between judgement amount posted in the paper and then the total judgement amount announced by the sheriff, and then the total amount the banks rep says they will bid up to. Is that what the just the bank is owed? It seems most sales there is no one interested in, so the banks rep buys house for the min $1000, but in a few sales, the investors start at the bank rep max bid number, and bid up the price for a while, but never come close to the judgement amount announced by the sheriff. Why is there a judgement amount if investors seem to buy the house for much lower than the judgement amount?
2- In many cases, there are multiple defendants listed. If you win the house below the total judgement amount announced by the sheriff, are any of these defendants getting paid, and by who, is the winning bidder actually paying out more than the winning bid amount?
3- Also, the sheriff web site recommends you run a title search, but at $300-500 each, are these investors all spending $300-500 each before they decide to bid?
First of all, each state and often each county has differing procedures. You definitely want to learn about the process, so having attended a few is a good start. As for your questions:
1) The judgement is probably the loan balance, plus fees, late fees, taxes, insurance, per diem interest, sheriff sale fees, attorney fees, property preservation, legal notices, title searches, etc. But the bank looks at what it can net by having the property listed after the sale. And if they can get paid off quickly for an amount less than the judgement, they will probably bid a lower number.
2) Additional lien holders would most likely get paid after property taxes, costs of the sale, and the first mortgage are paid. Often they end up with nothing.
3) That price sounds high. Are there independent searchers who might do it for less?
As a general rule, foreclosure procedures rack up massive fees every day that goes by as a result of the of the legal actions performed or notice issued.
It is scary how quickly those fees snowballs.
The judgment amount which is posted on the foreclosure notice at the time it is published is the amount the borrower in default would need to cure the default. It comprises the balance on the loan and all the legal fees, late fees and interests.
By the time, the property goes on sale at the sheriff, the judgement amount would increase because it would now factor some additional legal costs such as sheriff fees, attorney for the representation at the sale, etc.
At the sheriff sale in some counties, the lender foreclosing will announce up front its upset price which is the maximum they would be prepared to bid up to.
That upset price can be any amount the lender wants it to be. It is my experience that it is very rarely the same as the judgment amount announced by the sheriff.
Before bidding, it is very important to know the position (or seniority) of the lender foreclosing.
Because it determines who gets paid first and who could get nothing from the proceeds of the sheriff sale.
For example, if you are the highest bidder on a loan foreclosed by a second position lender, you would still have to come up with the amount to satisfy the first position loan before you can take ownership of the property.
Effectively, you can lose ALL of your money if you don't know if you are unlucky, have not done your research and don't know what you are doing.
It is recommended to always have a title research done before bidding at auction.
That is expensive and for that reason, it is my impression that very very very few people bidding at auction do that research.
Dan, TY for your reply, so i went to 3 auctions so far, and paying attention, but i still cant break the code, nor do i understand how this title report i paid $425 helps me make a decision on a specific house. heres what i know and dont know about this 1 house im interested in:
1. Know house is worth 750-800K as is, i have been inside this house as the landscaper multiple times to shut off the irrigation, its clean, no underground tanks in the ground, gas heat, well maintained until the last couple of years,
2. Know the sheriff advertised judgement is $482K, 1 plaintiff, 4 defendants, husband, wife, 2 banks,
3. Know the plaintiff, assume the original mortgage, title report says orig loan is $504K, back in 2002, transferred to multiple different banks over the years,
4. Know defendants are husband and wife, and an additional defendants, a Bank #2 is listed- title report says they hold a LOC for $100K, and another bank, a Bank One, NA is listed as a defendant, but the title report says nothing about them, I questioned the title company about that, but they say nothing about Bank One comes up in the title search, so my question is how can they be listed in sheriff advertisement as a defendent then?, title Co's answer- we dont know.
5. So dont know about this Bank One, and i thought i paid for a title report to answer these questions, as a newbie, i dont know who is BS ing who, i hope this is not SOP, kinda reminds me of asking questions to contractors who really dont know what they are doing, the BS just flies, im ok with passing on this one, but was hoping the title report would answer important questions needed to make the financial decision, especially if im going to be buying multiple title reports for multiple houses,
what do people do when there are these gray areas, seems expensive to hire a lawyer for every lead im tracking down.
Patrice, TY for your reply, so i paid for the title report, and im pretty sure the plaintiff is the original mortgagee, $505K, back in 2002, so i guess you call that the first position, so how would i know for sure if i bid on this house, and lets just say the winning bid is $300K, the other defendants, which are not only the homeowners, but 2 other bank entities, get nothing, and i get the house for $300K, do i need to have a lawyer look at the title report, is that what really cautious people do, i am so trying to get started, to make that first deal a success.
You need a partner one searches the deficiencies while bidding is going on. One has the have all the proposed auctioned homes pre-viewed at least from outside and estimated repaired cost and valuation. The auctioneers jump around often to bid on the homes you know nothing about.
It is also people watching event like an entertainment. The professional bidders often know each other. You do your home work and watch them see what prices are fetched. If you see these familiar faces laugh at a new face bidding. It is often a lemon. If you think you know the reason these pros pass the bidding you are then ready. The bulk bidders will buy more volume some at loss. You need to be discrete and cautious.
Sam, TY, and yes, i have been paying attention to the players, and it does seem like a handful each week are pros, and about rest 20+ just sit there like me and dont say a word, i already did the title report but i still have questions, so maybe a come ready to bid, and just wait, if no one bids anything, maybe they know something i dont, and i pass. in the meantime, i have a few more weeks before the date, assuming it doesnt get postponed again, , question- who would you turn to if the title report didnt answer all your questions,
Ok I just went through this in PA which could be similar. I was the owner the the note foreclosing
I was owed 450k or so with all the default interest etc property is worth about 500k fixed up.
my opening bid was 330k in hopes that someone would think 50k rehab and 500k exit would be enough spread to pay me off.
the bidding started very low the highest bid came in at 180k.. so they did not get it and the property reverted back to me.
I think the reason they start the bid low is there is transfer tax's etc.. and I had to pay them based on the 180k bid.. so I saved some money there.. the person bidding the 180k of course wasted their time.. I was the first.. we wiped out some other creditors with this sale..
don't know if that helps but I can tell you being pretty experienced west coast trustee sale buyer ( literally 100's of properties bought at courthouse steps) your stuff out in your neck of the woods is FAR MORE COMPLICATED..
Out our way if I set the opening bid at 330k that's were the auction would have started and the winner would have had to bid a dollar over to get it.
The final judgment amount is relevant to the parties of the foreclosure -- the soon-to-be non-owner and the foreclosing lender.
As a bidder you are playing by a different set of rules. Do your research. What the bank is "owed" is not the last word.
Updated over 3 years ago
A couple more things... NJ title searches don't cost anywhere near the amounts you've indicated. Even with the extra searches required in NJ you are in the $150 range. Lastly, if your bid is below the judgment amount, nobody other than the foreclosing first lien lender is getting paid a dime.