Please help to interpret what happened during Sheriff Sale

By
Real Estate Agent with Cutler Real Estate

I am embarassed to say I cannot answer one of my first time buyer's questions about a property. I am wondering if I could get some clarification from knowledgeable REO agents on what transpires during a Sheriff sale. Names and addresses have been changed to provide confidentiality, but the financial figures as shown in the tax records are true:

Property address: 123 Main Street

03/04/97 Property is owned by Happy Owners Trust, Mrs. Happy Owner Trustee, with a mortgage of        $47,450 held by Miscellaneous Mortgage Company.

04/01/05 Quit Claim Deed from Happy Owners Trust to Mr. April Fool, with new mortgage of $74,400  held by Let Us Be Your Mortgage Company.

01/13/09 Sheriff Sale to New Player Mortgage Company for $52,500

01/29/09 Judge of Ill Fated County Sheriff Deed to New Player Mortgage for $52,500

Question: What happened here? Was there a real auction sale whereby the New Player Mortgage Company actually bought something for a real dollar amount of $52,500, being it was something they already held the first mortgage lien on to begin with?

Question: Did New Player Mortgage Company have to pay a full $52,500 plus all the normal closing costs associated with an arm's length sale in the same amounts any other buyer would have had to pay?

Or.... did New Player Mortgage Company simply pay a reduced amount in order to protect their position during the Sheriff Sale auction process? What did New Player Mortgage really pay?

PS: The reference property at 123 Main Street is now Active on the MLS for $17,200. My first time home buyer wonders how a property that sold in January of this year for $52,500 is now on the market for $17,200. Can you help?

 Thanks for any and all help!

 

 

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Anonymous
Chrissy Moock

I always throught the sheriff sale amount was what the people owed on their mortgage?

Jul 30, 2009 07:58 AM #1
Rainer
52,042
Jim Dvorovy
Cutler Real Estate - Canton, OH
REALTOR - Canton Ohio Real Estate

Chrissy - I don't think so...but I've heard different versions of some sort of percentage, that if a property didn't bring a bid of say 75% of the appraised price, the bank usually buys it back in order to protect their investment... but I dunno! Wished I did know!

Jul 30, 2009 02:31 PM #2
Rainer
321,367
Russel Ray, San Diego Business & Marketing Consultant & Photographer
Russel Ray - San Diego State University, CA

I'm confused about the quitclaim deed since they don't usually have mortgages associated with them. They just confer interest in a property from one person to another, even if the first person doesn't have any interest, which is why title insurance is very valuable when there is a quitclaim deed involved.

It looks like we can take Happy Owners and Misc. Mortgage totally out of the equation because of the quitclaim deed, and I think that Mr. April Fool simply went out and refinanced the property. Then he defaulted on the loan that was held by LUBYMC.

After that, it looks like the bank proceeded directly to a sheriff's sale hoping that they could sell it and not have to carry it as an REO on their books. Better to take the loss immediately than have those carrying costs.

When the bank goes directly to a sheriff's sale, though, they usually have a reserve, which is often at least 75% of what is owed on the mortgage. If there is no bid for more than that amount, then the bank or one of its subsidiaries buys the property for 75%, the reserve amount.

Now that prices have fallen so significantly, the property is listed at today's fair market value, which is why no one bid on it at the sheriff's sale.

Although may people believe that they will get a bargain at a sheriff's sale, that's not always the case, especially in a declining market or when the market has significantly declined in the previous few years, as is the case righ tnow.

That's been my experience when I was flipping properties and going to sheriff's sales from 1973-2003.

Feb 08, 2010 01:00 PM #3
Rainer
90,099
Phil Hillerman
Crye-Leike Realtors® - Rogers, AR
Crye-Leike Realtors®

Hi Jim, I hope you got your question answered.  Time to post another one! :) Have a great day.

Sep 25, 2011 04:22 AM #4
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Rainer
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Jim Dvorovy

REALTOR - Canton Ohio Real Estate
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