Strange Auction Today In MD
I went to an auction today in Montgomery County. I usually stay away because the bidders always overbid for properties… that is if they actually make it to the auction day.
A townhouse was for sale.
-$55,000 original note established in 1998 (I thought this was a second, but found out that it was actually the first note)
-FMV apx $300,000
-Only about 7 bidders at the sale
One of the bidders was the actual homeowner. She actually had the $5,500 required deposit. She also had someone with her who I figured was fronting her the money. Nevertheless she had the cash. She won the property back with a bid of $292,000! (Other bidders were still bidding strong up to about $290,000. You can not make any money on a deal with $7,000 in equity. That would not even cover closing cost). I felt it was strange because the lady probably could have paid the $5,500 deposit to her lender and stopped the sale. The note balance was no more than $55,000. She now has a foreclosure on her record for the house she just bought. I don’t know who the guy with her was, but he had to be giving some lousy advice. If anyone understands how it made any sense to purchase her property back at the auction, please share with the group.
OK... Try to follow this scenario.
Look closely at the final judgment. It may state that the defendent is foreclosed of all interest when the certificate of sale is issued, as most are in Florida.
Up til the certificate of sale is issued, the defendent or a purchaser of the property can redeem the property by paying off the judgment plus post-judgment expense...usually about $500 above the judgment amount.
OK....She was the high bid. She paid the $5500 deposit. What if she defaults? What if she does not pay the balance of the purchase price? Obviously, the sale was not completed and no certificate of sale was issued.
Which means she still owns the property and has 30 days or so to redeem the property for the judgment amount + $500 or so. She has no foreclosure on her record. She redeemed the property!
How about the $5,500 deposit? Oh, that is given to the Plaintiff and is applied to the judgment, thus reducing the amount required to redeem.
Pretty slick, huh? This is not science fiction. I have seen this done and have done it a few times myself.
Her advisor was probably the investor who ended up with the property. But if she was capable of REALLY analyzing what was taking place....she would have dropped out of the bidding and let it go at $290,000...and possibly collected $235,000 or so in surplus funds, minus any 2nd mortgages or liens.
What do you think? Possible?
[addsig]
Could also be that there were other liens that needed a foreclosure sale to be extinguished, liens that mere redemption would keep alive. Or maybe she needed to buy some time to get those bars of gold dug up out of the yard...