Holly20109, Other/Just Looking in 20109

Can homeowner bid on own home at foreclosure auction?

Asked by Holly20109, 20109 Sun Jul 25, 2010

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19
Trystrum48, Home Owner, San Diego County, CA
Tue Feb 8, 2011
Consider these facts: We owe $870,000 on an interest-only first trust deed. Our best estimated market value is currently $600,000. It is highly unlikely that home prices in our area will rise sufficiently in the next decade to enable us to get out of the property at break-even. Consider also that our property needs a minimum of $200,000 in repairs which would be required if the property were placed on the market. With an interest-only mortgage payment equal to 200% of the estimated rent on an equivalent property, we are effectively renting our house for double what the rent should be. We would be willing to continue to own the home if PNC would lower our mortgage debt equivalent to the market value and reduce our interest to the prevailing rate. However, as many of you will be quick to point out, PNC would be loathe to do this, even knowing that they would recover less than our requested modified price should the property go to foreclosure. Considering lost interest, repair costs, etc., our estimate is that PNC might eventually recover only $350,000 to $400,000 of the amount of the original loan amount.

So why would we bid on our own property at auction? A better question might be: Why would PNC not see the fiscal relevancy of reducing our loan balance to $600,000 to avoid far greater losses should the property go into default? Further, why would PNC bid on a property that would only add to their excess inventory and lose an additional $200,000 to $250,000 in the process. However, to answer my initial question: 1) we have a wealthy relative willing to buy the property and rent back to us at the prevailing rent price, and 2) it is highly likely that, in the current economic climate, PNC would let the property go at less than the current market value. Also, as it is within our right to promulgate the true nature of the property's condition, I suspect that any other bidders would be willing to bid higher than market value, minus the cost to make the marketable.

The lesson here is that some property owners have been in the their homes for many years, don't wish to move, are less concerned about ownership when their landlord is a relative, and can't stomach the idea that they are paying double each month than what they could. Further, there is a lesson here for the banks who need to be more realistic in today's economic climate; if they are to remain solvent without tax-payer bailouts and if they are to be responsible to their stockholders, they need to negotiate better with home owners. It is a pipe dream to believe that banks will ever recover the massive losses from all the foreclosed properties they have purchased at inflated values. Eventually these properties will be sold at fire sale prices that will only act to keep home values depressed for decades to come.
1 vote
Marilyn Cunn…, Agent, Gainesville, VA
Fri May 9, 2014
As others have said, the foreclosure will be governed by state law and the terms of your deed of trust or mortgage. In Virginia you would have a deed of trust and be foreclosed on by a Trustee who could accept your bid if you have the standard form. However, to outbid the bank you would be bidding the amount owed plus costs which would include up to a 5% Trustee's Fee. Moreover you'd need a large cash downpayment the day of the sale (amount varies and is set by the Trustee) lus close within 30 days. In Virginia you have the right to redeem by paying what is owed which would be a better course of action. Virginia has no right to redeem after the sale. Good Luck
0 votes
Judson E. Cr…, , Mobile, AL
Tue Feb 18, 2014
Yes, you can. The power of sale contained in most mortgages made in the past 20 years (if you're using the Fannie/Freddie uniform instrument like 90% of the mortgages in the US do) clearly states that the property will be sold "to the highest bidder at public auction." The mortgage does not contain anything which states that the Borrower and the "highest bidder" cannot be the same person. If you are the highest bidder and they refuse to make the sale, then they're violating the terms of the mortgage and the foreclosure itself could be void. Now, they have the right to credit-bid up to the balance of their mortgage, and if you owe them $100,000 and you bid $99,000, theirs is the highest bid even though they're not putting actual dollars forward. But if you bid $101,000 and they refuse to take it, the foreclosure sale was not conducted according to the terms of the mortgage and is void - trying to enforce such a sale against you would be setting themselves up for a wrongful foreclosure lawsuit.

It is possible that some state law prevents a borrower from bidding, but in most places, the terms of the mortgage govern and the bank has no right to reject a bid. Now - why would someone do this if they have the cash? 2 words: junior liens. A foreclosure extinguishes the second (and third) mortgages on a property, and while a borrower remains liable for those debts, the debts are no longer attached to their home. Which means that they can't be enforced without a lawsuit which means they're easier to settle for a discount.
Web Reference:  http://www.fthebanks.net
0 votes
james talbot, Home Buyer, Manassas, VA
Mon Jan 7, 2013
I see only two or three valuable responses. Most seem to assume that the owner cannot afford to bid on his or her own property, but why then would one even have proposed the question? How did it not occur to you that some have determined that their incentive to continue paying on their house, whether primary or investment, has deteriorated?
0 votes
There seems to be a lot of question marks on this topic...

I think it 'boils down' to "What financial liabilities does the buyer incur?" as compared to "What financial liability remains for the current owner after the sale and/or foreclosure of said property?" But then the compounding factor is introduced in that the buyer and owner are the same person. Is the buyer able to somehow legally eliminate any of his or her own previously held liability in this supposed transaction?
Flag Mon Jan 7, 2013
My NC Homes…, Agent, Chapel Hill, NC
Fri Jul 13, 2012
The simple answer is no. While you may bid the lender will not accept a bid from you or a direct family member. If you can afford to buy your home then you could have afforded to make your mortgage payments. I suspect you decided that you were upside down and that it made more sense for you to simply let the bank foreclose than to make your payments. What you should have done was hire an attorney at the time and focus on having your mortgage re-written but that's not an option now.

Unless I'm mistaken I also believe bids from direct family members would not be accepted.
0 votes
They would never know it was a direct family member...of course they can get someone to bid for them.
Flag Sun Dec 4, 2016
I disagree. The power of sale contained in the mortgage (if you're using the Fannie/Freddie uniform instrument like 90% of the mortgages in the US do) clearly states that the property will be sold "to the highest bidder at public auction." The mortgage does not contain anything which states that the Borrower and the "highest bidder" cannot be the same person. If you are the highest bidder and they refuse to make the sale, then they're violating the terms of the mortgage and the foreclosure itself could be void. Now, they have the right to credit-bid up to the balance of their mortgage, and if you owe them $100,000 and you bid $99,000, theirs is the highest bid even though they're not putting actual dollars forward. But if you bid $101,000 and they refuse to take it, the foreclosure sale was not conducted according to the terms of the mortgage and is void - trying to enforce such a sale against you would be setting themselves up for a wrongful foreclosure lawsuit.
Flag Tue Feb 18, 2014
Chick, , Ohio
Fri Jul 13, 2012
Let me see if she is thinking what I am thinking: Situation: property was foreclosed on 2 + years ago but the property still has not sold after 3 auctions. The home owners are now out of the property and back on their feet in good standing with credit etc. They file for a home loan but the only thing holding things up is the foreclosure still in their name. The home owners are thinking if they bid a minimum on the property that the bank would then jump in and out bid taking over the property completely. Basically they (the banks) need this in order to have it in their names to write the portfolio off on their end. The banks are just waiting for something to happen. Either they get it which they are still the loan holders and write it off or someone else actually pays something for it which unless it's enough the banks might still buy it because the write off is more than the pittance they might get. Back to the owners. Once this takes place it is out of their name and they can now move on. i'm not sure if that is what Holly is suggesting and I am not a rental lawyer either but it sounds like it's the only thing to get things moving.
0 votes
Nelene Gibbs, Agent, Virginia Beach, VA
Fri Jul 30, 2010
It is not very likely the bank will take a bid for you on your own home. If you have money to bid they would wonder why you did not have money to pay the mortgage. If you have not gone to foreclosure yet it would be best to try to work something out with the bank in advance. Best of luck to you!

Nelene Gibbs, Realtor, e-Pro
Real Estate Investment Advisors
www: nelenegibbs.com
Web Reference:  http://www.nelenegibbs.com
0 votes
Rita Gibbons, , Fredericksburg, VA
Wed Jul 28, 2010
It sounds like you want to bid on your own home at the foreclosure auction. If I understand your question correctly, no. The foreclosing bank will not allow you to purchase your property that went into foreclosure.
0 votes
John Juarez, Agent, Fremont, CA
Sun Jul 25, 2010
Holly,

The bank may be willing to sell you the home at the foreclosure auction if you have the cash to be the highest bidder. But if you have that cash, why are you in this predicament?
0 votes
Maggie Hawk, Agent, New Smyrna Beach, FL
Sun Jul 25, 2010
Holly,
It all depends on the laws in the state where the property is located. You may want to consult with an attorney to determine the best course of action for you.

In some states, you can reinstate your mortgage before the property is sold. This involves paying the payments that you've missed, as well as any additional charges, such as late fees and other expenses you have incurred. Reinstatement stops the foreclosure from proceeding.

If reinstatement is not a possibility, you may still be able to redeem your property after it's sold, IF state law allows it. However, redemption requires a greater outlay of money for the homeowner, since it involves paying off the entire loan amount.

The website below is an excellent reference that provides information for each state:

http://www.forecloseddreams.com/state-foreclosure-statutes

I see from your zip code that you're from Virginia. Here is a summary of the foreclosure procedures in your state:

http://www.forecloseddreams.com/virginia-foreclosure-procedures

I hope this helps.

Warm regards,
Maggie Hawk, REALTOR
(386) 314-1149
Watson Realty Corp.
0 votes
Bob Movin-On, , Hartford, CT
Sun Jul 25, 2010
Why and how would you do that? Maybe you do not realize the bank will bid what you owe plus costs to foreclose, you could offer less to settle prior to the auction if you had the money.

Good Luck
Bob Patrick
Buy a home after foreclosure expert
0 votes
Scott Godzyk, Agent, Manchester, NH
Sun Jul 25, 2010
Holly you certainly can bid, you will need a certified or cashiers check to bid, in most cases it is $5000 to $10,000. Check the auction directions for teh exact amount. There can not be any conditions and you must close within 30 days. In most cases you need the full amount in cash to be able to close in time. You will be bidding against your bank who will usually bid up to 80% of what you owe. if you buy at auction it will nt wipe out any back property taxes you owe or any 2 nd mortgages or liens.

good luck working things out
Web Reference:  http://www.ScottSellsNH.com
0 votes
Janet Nation,…, Agent, Baldwin, NY
Sun Jul 25, 2010
This is a bizare question, I'm not a foreclosure expert of any means but why would the bank sell your house back to you at an auction? Wouldn't they have worked something else out with you instead like a modification of some sort before going throught the time and expense of foreclosing on you?
0 votes
Robin Silver…, Mortgage Broker Or Lender, Garden City, NY
Sun Jul 25, 2010
The bigger question is whether you are going to need financing for this home. If you had the money to pay all cash for the home, there should be no reason for you to go into foreclosure. So, i will assume you are planning to try to get a loan for the home. No lender is going to give you a loan if you were that far behind on your mortgage payments that the bank foreclosed.
0 votes
Don Tepper, Agent, Burke, VA
Sun Jul 25, 2010
As the others note, the bank likely is going to bid what was owed. So let's say you owed $200,000. It's not likely that you'll be able to buy your old home for $150,000. Even if you were, it's improbably that you'd have $150,000 available to buy it back. And, with the more likely scenario that the bank bids $200,000--if you'd had the $200,000 at the time of the foreclosure, wouldn't you have just paid it?

If you're thinking that the house might sell for $10,000, that's really not going to happen.

Hope that helps.
0 votes
Cindy Jones, Agent, Alexandira, VA
Sun Jul 25, 2010
Homes at a foreclosure auction aren't necessarily bargains. In addition they require a quick close and certified funds of $10-15K to be able to bid. I"m not sure an owner who just lost the home to foreclosure would be financially qualified to buy it back at auction.
0 votes
Fred Glick, Agent, Mountain View, CA
Sun Jul 25, 2010
Sure, but the bank is going to bid what they are owed so just make a deal with the mortgage holder beforehand.
Web Reference:  http://fglick.com
0 votes
Vicky Chrisn…, Agent, Purcellvile, VA
Sun Jul 25, 2010
At a foreclosure auction the bank is going to probably bid what is due to it. I am guessing if the owner could pay 100% of what was owed to the bank in cash within 30 days they could avoid the foreclosure. So, I don't think that comes up too much.
0 votes
Trina Korsga…, Agent, Fredericksburg, VA
Sun Jul 25, 2010
Are you asking if you can bid on the house you own at an auction at the courthouse steps? or your house that has been taken over by the bank?
0 votes
Yes, I am asking if I have the legal right to bid on my own home at the courthouse auction whereas my home is in foreclosure by the Bank of America AKA/ Bank of New York Mellon and if so, are there any pre-conditions such as putting up a minimum of cash to enter into the bidding process.
Flag Thu Jan 24, 2013
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