Why would Wells Fargo out bid me at the Sheriff Sale?

Asked by Indymill, Greenwood, IN Fri Feb 17, 2012

The judgement on this house was $ 360,000. The opening bid started at $ 235,000 and my top bid was $ 285,000 and the bank came back at $ 291,000 so I lost the auction. After the sale I approched the banks lawyer and asked what their top dollar was for bidding and he said they would have went to $ 385,000. I am confused why when the house on the market right now may only be worth $ 300,000, Why did they outbid me and why would they spend so much to get this house? Is there anything I can do to get it besides waiting for it to hit the market? I really need help and really want this dream home for me and my family. Please help!

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ejajh2’s answer
ejajh2, Home Buyer, Portage, IN
Wed Nov 28, 2012
The banks send bidders to buy the house at sheriff sales to make a profit. If the lien is $300,000 and the house is worth $360,000, the bank will bid to win the house to flip it. If the previous owner owed $300,000 and they can get it for under that, they will buy the house because the difference in what they paid versus what is owed allows the bank to recover the difference from the previous owner. Once winning a house, they will turn around and make small repairs and then put it on the market for full market value to sell. So, if $300k is still owed and lets say they get it for the $385k, they show the previous owner paid in full and now they own the house outright. Then they sell the house for $360,000 in a few months, so in the long run, they made $360,000 (selling price) minus $25,000 (overpaid at auction) plus $$$$ (monthly mortgage and interest from previous owner for however long they owned the house). So the shorter period of a lender holding the mortgage they will buy cheaper than lien at sheriff auction however, according to the numbers, the longer they hold the mortgage the more they will pay for it at auction.
0 votes
Bill Eckler, Agent, Venice, FL
Sat Feb 18, 2012

We're sorry for your frustration and bad auction experience. The bank's representation did exactly what they are coached to do at auctions....an that is to not let the property go for anything less that the debt that is owed to them. The $385,000 is obviously the amount owed plus legal fees, liens, processing, etc.

The sad part of this is that you were willing to purchase the home for $285,000. The all together too often scenario is that the bank later sells the property as a foreclosure for less than the amount the they could have recognized by taking the earlier offer.

The best advice is not to get too involved trying to understand why banks do anything. Many decisions defy logic, common sense, or any resemblence to good business practice and could cause normal people to start talking to themselves.....

5 votes
Stormylena, Home Buyer, Oklahoma City, OK
Thu Aug 20, 2015
The foreclosure process followed by any bank depends on the state's foreclosure laws. Depending on where you are located, find the stat's foreclosure laws and that should help you with the process. For more info about Wells Fargo floreclosure process, check out: http://ForeclosureIQ.com
3 votes
Hiltondiaz, Home Buyer, New York, NY
Wed Jun 15, 2016
The answer is very simple, same as you are trying to buy chipper and save money which you can sell and make money. The banks are doing the same and the worse is that they do it with our own money.
every time you put more many in the bank, you give them more power to do what they do. and all boils down to interest. lf you buy a house and get a 30years loan for it: let say $300K with a fix rate of 5%. that means that at the end of the loan you paid the bank ~$280K on interest alone. so if you buy the house cash, the bank lost the opportunity to make $280K plus more. so that is why they outbid you. tho other thing is now they sold the house to someone else (John X) that doesn't have the cash and is willing to pay the interest.
now John bought it and didn't miss a payment for 5 years. now he lost his job and can't keep the house and let it go to foreclosure ( back to the bank)
At 5 years into the loan, John already paid the bank $73.5K on interest alone. and the balance of the house is $275K (foreclosure value?) so the bank can outbid you up to ~$348K (73.5 +275) my guess.
If that happened at 10 years, the interest would be $138.3K and the balance $244K.(foreclosure value?) so the bank can outbid you up to ~$380K (138.3 +244K) my guess.
so either way, if you finish the loan or fail, the bank wins. that is why they are in business.
1 vote
Helmer Zapata, Agent, Union, NJ
Thu Nov 5, 2015
A bank may be outbidding you simply to clean the deed, If there are 2nd and 3rd liens the foreclosure will wipe out the liens and the first liens holder takes hold of the property free and clear of liens of-course for as long as it out bids the rest. The bank then decides what to do after. Fannie Mae for example, limits the second lean settlement amount on a property going foreclosure to 6K.
1 vote
webbfamily91…, , Zanesville, OH
Mon Jan 8, 2018
Can you give us an update? We have our eyes on a house going to Sheriff Sale in Marion County and we are wondering how long after the SS will it take for Wells Fargo to list it on the market as foreclosure....
0 votes
Melanierosed…, Both Buyer And Seller, New York, NY
Wed Dec 27, 2017
The bank owned the house. Their bid was a complicated transaction necessary to re-obtain their asset. Sheriff's sales on bank-owned houses are pointless. Unless the owner had a healthy chunk of equity in the house, the liens are not repaid and the house goes back to the bank.

My neighbor's house is set for a sheriff sale in February to pay off dependents in a criminal matter. My mom wants to buy the house. We were told not to bother bidding, as the bank would outbid us far beyond the value of the house.

Your best bet is to wait for Wells Fargo to put the house back on the market. They will.
0 votes
Adrian Brown, Home Buyer,
Tue Dec 27, 2016
Lol, the bank has defualt insurance that protects there loans on houses with less than 70 percent of equity. Along side with some other loan backer. The ploicy cost comes out of the note. In order to file they have to call the note due. Which is how you end up court. They cant file on property they dont own. So they clear the owners from the title. Sell the asset and the insurance covers the balance. Unless you want to. They loss nothing; but the more bad notes the higher risk the banks are so unless the banks lawyer doesnt show up. Best just to let them bid as much as they want to on there on stuff.
0 votes
Ash Nicole, Home Buyer, New York, NY
Sun Oct 16, 2016
Most of the answers I read here are wrong. The Bank bids to the total debt so they get paid. Many loans serviced by banks are not owned by them. Additionally many loans have PMI (insurance). If they let the property go for less than what they are owed they may lose out on being able to file a claim with the investor or insurer of the loan. Plus since they are the plaintiff in the lawsuit they are not actually paying anything when they bid. Additionally the bank isn't going to bid more than they are owed because in most states they would not be entitled to the excess proceeds. Those funds would go to other lien holders on the property or the prior owner. Banks aren't in the business of flipping properties. If you like a house that reverts to the bank at auction you will have to try to get it in REO (Often at a much lower price than the auction bid was)
0 votes
jiggymace, Home Buyer, New Haven, CT
Sun Nov 16, 2014
Hi Indymill,

Just wondering what ever happened with the house you bid for at the auction. How long did it take before the bank listed it? Did you make an offer and did it go for more or less than the auction amount? My husband and I had a similar situation. We went to an auction yesterday and were the only other bidders besides the bank. They also outbid us and now we are wondering how to get the property. It was Wells Fargo also. Does anyone know if you can work with the bank to purchase before they put it on the market?
0 votes
The same thing happened to me in Jacksonville, on two homes that I wanted. Wells Fargo is the bank that holds the mortgage on both homes. At this point I am trying to buy homes where the notes are not held by Wells Fargo. They are in a non-negotiation mode.
Flag Thu Jan 12, 2017
selfmotivated, , Greenwood, IN
Wed Jun 12, 2013
its simple. The bank will earn much more then they paid from the mortgage interest. Just like when I offered to buy a $450,000 house for $450,000 cash they declined me and sold it to a couple who was barely approved for $400,000 but with out the pre-payment option. Banks are all about the long term profit. Sorry.
0 votes
who, Home Buyer, Greenwood, IN
Fri Mar 8, 2013
My mom lost her house, she owed 97k. it went to sheriffs auction. I bought the house for 77k. I knew the house was in great shape other than the roof which is now being replaced for 7k. The house is worth 130-140k. screw the banks, figure out a way to come up with the cash to buy it and let them foreclose on it. you will get it cheap at the auction
0 votes
Robert D Hug…, Agent, Devon, PA
Sun Feb 19, 2012
Indymill although most REO properties come to the market with an REO agent, If I were you I would try and get hold of the REO and asset manager department of Wells Fargo that has your property. Although many on here will tell you can only purchase through an REO agent that is not always true. I know people who were persistent like you and were able to buy from the bank directly. Your $285,000 bid may no longer be valid. However, if you are able to connect with the right people in that bank maybe you can work it out?

There are no guarantees or promises, just some experiences I am passing onto you. Larger banks like Wells and Bank of America usually will go the REO route. If that's the case find the agent who will represent that property, and stick to them like glue.

I am very sorry to hear your story as I hear it all too often. I equate banks like politicians, why would you take a mediocre pay unless you were going to be rewarded 10 fold. I'm afraid the real world is ALL about money and Bankers are notorious for getting the most they can. Otherwise why do they pay you and I less than 1% interest on our accounts.

I respect your persistence and good things come to people like you, hang in there.

Rob :-)
0 votes
Indymill, Home Buyer, Greenwood, IN
Sat Feb 18, 2012

Thanks for your response! You really put it into perspective for me since I have been talking to myself for a few days now :) It really has been driving me crazy and I know I will never get a good enough answer to justify why the bank took my dream home away from me. I guess all I can ask now is what can I do to get it????? Is there anything I can do???? I was just going to wait until it hit the market and have a realtor put in a cash bid with no contingencies if the price is within my original 285,000 bid and hope that they accept! Any advice on how to proceed?

Thanks Again, I truly appreciate all the feedback from everyone.

0 votes
Indymill, Home Buyer, Greenwood, IN
Sat Feb 18, 2012
Thank you for your response! It was very helpful to read your reply and try to understand why they do what they do. I didn’t mention it but the home I am interested in was to be auctioned off last year in August, so you are correct about them pulling them out of the auction and collecting their funny money from the government. I have spent endless hours doing my homework on this home and I was confident in my findings to proceed with a cashier’s check for $285,000 to purchase. I had a title search done by a title company, I researched the court records myself to cross reference with the title company’s findings. I went as far as pulling the plat from the recorder’s office to look into easements. Also, in my findings I located all the previous owners, which were only two, but one of them did rent it out. I found the renters on facebook and looked threw their public photos of them living in the property. I know where they all live, their numbers, ect. Defiantly not a lack of research on my behalf. And this property is now an REO since Wells Fargo outbid me at the auction just hasn’t hit the market yet. Thanks for the luck; I sure do need it to continue my quest for a way to get this home.

0 votes
Indymill, Home Buyer, Greenwood, IN
Sat Feb 18, 2012
I feel better knowing I am not alone trying to understand this whole mess; however I am unable to change my expectations on the home of my dreams as suggested. I am currently looking at every home on the market not just bank homes. Unfortunately the home that meets my requirements as to what I am looking for to live in the rest of my life happens to be bank owned now since I lost the auction. I currently own and I am not willing to just settle as it wouldn’t be fair to my daughter since our main reason for moving is for better schools and a little bigger home. I would choose to stay in our home now and put her into a private school than to move into something that I don’t see myself wanting to live in just because it seems like the best deal ever.

I do appreciate the feedback, Thank YOu!
0 votes
Robert D Hug…, Agent, Devon, PA
Fri Feb 17, 2012
Indymill, you raise a lot of good questions. Simply put the lender can make more money between re-selling the property, writing off losses, getting ridiculous amounts of money from Private Insurance type companies, getting their hands on any government funds like TARP funds.

Banks are not in business to lose money and trust me the old adage of lenders don't want to own real estate is not true today. They may not want to keep them and rent them out but they sure do want the properties back at the auctions. I know of 5 properties that went the way yours did. other times the bank pulls the property back on the auction day. Unless we can chat with the banks asset manager we will never know their actual reason, other than not to lose money.

That way they can take their losses, fix-up the property or wait until timing is better for them. This is the reason why they take so long completing short-sales, or very few loan modifications are approved. If you have your heart set on purchasing these kinds of properties Indymill, go after the REO's. These are properties already taken back and on the market for resale. Most lenders prefer owner occupants top investors. Besides unless you have done your research and homework, you could get stuck paying off other liens at a sheriff sale. Proceed with caution, please.

I hope it all works out for you,

0 votes
Christine Mc…, Agent, Valparaiso, IN
Fri Feb 17, 2012
Indymill, There really isn't any common sense to what the banks do. There are alot of foreclosure opportunities on the market. You have to be willing to change up what you want in a home to take advantage of them. We've all seen banks turn down offers and then sell homes for tens and hundreds of thousands less. They may have appraisals or BPO's to support their bidding price. It doesn't really matter. Trust me, we're trying to make sense of it too.
0 votes
Indymill, Home Buyer, Greenwood, IN
Fri Feb 17, 2012
Thanks for your response Joe. I still don't see that being the case unless I missed something. The same bank "Wells Fargo" bought back another house a few months ago for $ 280,000 at the Sheriff Sale but just listed it for $ 170,000. This isn't the only example I have seen there are many more to compare their price in which they paid to what they have it on the market for now and it just doesn't make sense to list it way below what they payed for it. However, you are the broker and I am just a buyer trying to make sense of how I lost it and how I can still get it.
0 votes
Joe Shoemaker, Agent, Carmel, IN
Fri Feb 17, 2012
Apparently the bank felt that it was in their financial interest to buy the house at $291,000 and put it on the open market. I expect that the Broker Price Opinions done in their behalf showed that there's money to be made in doing so.

Good luck.

Joe Shoemaker
Principal Broker, REALTOR®
MacDuff Realty Group, LLC
317 413.8501
Web Reference:  http://www.macduffrealty.com
0 votes
I worked in the foreclosure dept of a large mortgage company and we bid a % of the FMV or what was owed on the loan, whatever was LESS. For us the state where the foreclosure occurred did not matter. I would assume that not all banks follow the same procedure however.
Flag Tue Dec 27, 2016
Flag Thu Mar 26, 2015
The answer is massive tax deductible write offs, balancing their sheets at any certain given time of the year as auction show up on their books everyday. Time/dates affects money drastically so whether the bank will let it go or buy it back it all sums up to what are their options at that certain time with that certain mortgage/note, NOT PROPERTY. ITS A NUMBERS GAME MY FRIENDS, YOU CONTROL THE NUMBERS AND YOU WIN. The bank will never loose as they can afford brilliant numbers individuals to manage sheets. Dont hate the player , hate the financial game.
Flag Thu Mar 26, 2015
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