Posted by NJDave on December 16, 1999 at 08:00:43:
The bidding was spirited and competitive as this was a prime property.
The Defendant’s (both as an Individual and Executrix of an Estate) bid was limited only by the amount of available cash on hand since the Successful Bidder had to produce 20% of the winning bid in cash, certified funds, or approved money orders immediately following the sale.
It is my understanding that any portion of the winning bid that exceeded the judgment amount would be returned as SURPLUS FUNDS to the Superior Court. The former mortgagor would have to petition the Court for it’s return. In this case it would be returned to the Estate.
NJDave and I just attended a sheriff’s sale. One of the property owners bid on their own property, won it back for $226,000 despite the fact that all they owed to the first and second combined was $135,000. We can’t figure out their rationale other than wiping out the other family members’ interests. Would it be worth such a premium to do this though? Any ideas?
Was there competitive bidding that took it up that high? Or, did the owner just bid that amount cold?
If there was competitive bidding, then, JD, Todd and ray are probably right. He had to take the property through a judicial sale in order to clear the title from other (title) claims, and that’s how high he had to go to keep the property. It didn’t make any difference how much he bid. He could have gone to $500k, since he gets back all the money over and above the mortgage debt. (Most intelligent sheriff sale bidders won’t bid against the owner, because it’s a waste of time.)
If he just bid that high with no competing bidders, I haven’t a clue as to why he’d do that. (Trying to increase his basis for tax purposes? The IRS would probably have two words for him - nice try.)
In addition to the senario you describe, I have also seen situations where the owner of a property that is owned free and clear will have a strawman (it does seem to always be a man) purchase the tax lien certificate, and then let the property go to Deed years later (no competitive bidding after tax lien cert is purchased in my State, I also suspect that a significant percentage of tax liens that go to Deed are the result of similar strawman situations). Of all the senarios of this sort and of the sort you described, that I have seen, all have involved either a person that died intestate, a person that died with a lot of credit card or medical debt (unrecorded claims), or a complicated tax avoidance strategy.
The latter is a good guess. Not many people in foreclosure think of this option to clear the title. I do loss mitigation for a bank. I have seen this happen a few times. The situation at hand involved nasty divorces each time. The homeowners let the property go to foreclosure, with the purpose of wiping the other from title. Each time it happened, one spouse was attempting to sell the property, while the other was being vindictive, and not agreeing to the sale of the property.
Posted by ray@lcorn on December 15, 1999 at 21:50:28:
Ben,
Not knowing anything of the laws in NJ, nor anything of the circumstances that precipitated the “sherrif’s sale” (taxes, foreclosure, judgement, etc.) I can only hazard a pure guess…
In my home state of Virginia, when the property brings more than the total of the liens, any excess proceeds go to back to the owner after deducting costs of sale, administration, etc. So, if that is also the case in NJ, then the owner was bidding with money he was sure to be refunded at least in the amount of his proportionate share of ownership after paying all claims. In effect, he was able to clear the title of heirs, claims and liens for the costs of the sale and the proportion of the overage that he didn’t own. That may have been well worth the money if he had a hostile situation in determining value with either heirs or lenders. The only alternative may have been a partition suit, which could have conceivably exposed the property to a more conventional, and therefore higher priced, auction.