Sherif Sales/Upset Price

[Andrew Cowles]

Does anyone know how upset prices are actually set for sherif sales?

Most people say it is just what is left owed on the mortgage but I’m not entirely sure that’s the case. Some properties only have 15k left on the mortgage but are worth 200k and I can’t imagine the bank will allow that property to go for 15k. 

This makes planning for auctions extremely hard not knowing what the upset price is because I have no idea what actually looks like a good deal and I’m only 21 so I have a limited amount of capital and I don’t want to go in expecting to be able to bid on a property because there is only 50k owed on the mortgage when in reality the upset price is double that. 

Thanks for any help.

v/r

Drew

[Kevin Sobilo]

@Andrew Cowles, a very good question.

In my state, and your state may differ, the upset price is an "unofficial bid" by the moving party. So, basically the lender foreclosing sends a lawyer to represent them at the sale and the lawyer is announcing what the lender is willing to bid up to to take the property. This helps expedite the sales because often the lender is willing to pay more than anyone else there.

So, the lender will look at the situation. Maybe they are owed $100k, but they think the house is only worth $50k. It will also cost them money to buy it and then to pay an agent to sell it. So, they might announce an upset price of $45k because to them that is better than buying it and trying to resell it.

So, it isn't necessarily based on what's owed. It's a financial decision by the lender based on the circumstances.

Also keep in mind that there may be more than one lender involved. So, the lender who foreclosed might be owed $50k, but there might be other liens owed such as a second mortgage or liens from municipal utilities that need to be paid. That could be why an upset price is higher or lower than expected.

Also, the lender has more info about these properties many times. If they have been vacated, they have property preservation companies break in and secure the properties to protect it. So, they may know the condition of the property better than you will.

I hope this helps. Some of these details may be different in your state. I am in Pennsylvania.