Simplifying the Foreclosure Process

[Fouad Hayek]

I was interested in a house that was foreclosed on in March of 2020 in Stark County, Ohio. It went to a Sheriff's sale and the Bank ended up buying the property at the starting bid which was 2/3 of the appraised value, $120,000. If this home was placed on the market, I do not think anyone would have paid that much for it. I do not even think that the bank was owed that amount from the homeowner. Why was the bank so interested in buying it back? I know for a fact that the bank will throw this back on the market, but after all costs and fees added to the price they paid at the sale, would it be worthwhile for the bank? 

Thank you!

[Ron S.]

Originally posted by @Fouad Hayek:

I was interested in a house that was foreclosed on in March of 2020 in Stark County, Ohio. It went to a Sheriff's sale and the Bank ended up buying the property at the starting bid which was 2/3 of the appraised value, $120,000. If this home was placed on the market, I do not think anyone would have paid that much for it. I do not even think that the bank was owed that amount from the homeowner. Why was the bank so interested in buying it back? I know for a fact that the bank will throw this back on the market, but after all costs and fees added to the price they paid at the sale, would it be worthwhile for the bank? 

Thank you!

The foreclosure process is already simple. Part of the problem is, your view of the process is flawed.The bank didn't "buy" it back. The bank submitted a credit bid as the opening bid/starting bid. That means, they instructed the trustee to start the auction at a specific dollar amount. It's usually a formula if the value is not sufficient to cover the total debt. If no one bids, the property reverts back to the bank as REO. The bank cannot bid more than they are owed. The can start with less than they are owed. They can continue to bid up to what they are owed. Many banks start with less than they are owed so as to entice third party bidders. The bank would typically bid up to their total debt or, up to a point that their calculations show is sufficient for the bank to recover as much as they think they will recover without further risk of owning the property in REO. The bank is not interested in buying it back. The bank is required to throw it back on the market if it reverts back to them.