New to Sheriff Sales - a few questions

[Mark Beekman]

I attended a Sheriff Sale in Montgomery County, PA the other day just to observe. Things were slightly different than the neighboring Chester County, PA Sheriff Sale. I ran across a few things that didn't make sense to me, so I thought I'd run it by the BP crowd:

1. Each property listed had a "debt" amount, a "cost" amount, and an "upset price". I assume that the "debt" is what's owed on the foreclosing lien, the "cost" is the amount of attorney fees, filing fees, etc, and the "upset price" is basically the starting price for bids. Is this correct?

2. There were instances where the upset prices were well above the debt amount, but others were well below. This threw me off. I was doing my research on prospective properties based solely on the debt amounts that were within my budget. Had I known that the upset prices could be significantly lower than the debt, I would've researched way more properties. Is there a reason for the difference?

3. The vast majority of the properties were bought back by the attorneys for "cost", being that that's what the opening and only bids were. It was tough to hear and keep track so I may be mistaken, but there were a few instances of people bidding against the attorneys for over "cost", but under the upset price. Going back to question #1, I thought the upset price was the starting point for bidders. How/why would someone bid under the upset price?

[Steve Babiak]

1. The costs that the sheriff publishes do NOT include attorney's fees; they are simply the costs the county incurred in bringing the property to sheriff sale.

2. "Upset prices" can be below the published debt for lots of reasons. Happens more in certain areas (for example Pottstown and Norristown in Montgomery County) than others. Just consider the bank's motivation to sell to be inverse to the amount above the debt that they set the "upset price" to be; when it's less that indicates more motivation to sell. But many of those below the debt amount are STILL priced above market value = not a deal.

3. Bidders can bid any number above the previous bid (provided they exceed the previous bid by a certain amount per sheriff sale rules for the county). When the bank's attorney bids "costs", the next person can bid the next increment above costs in hopes that the bank's attorney might let it go below the "upset price". I haven't seen the bank's attorney let it go for less yet (although it almost happened once). What you saw is that this sort of bidding just wastes everybody's time, since the bidder isn't interested in exceeding the bank's "upset price", so they drop out almost always. Once I saw a guy bid below, and he went back and forth with the attorney in bidding, until the attorney actually bid the "upset" amount. Then that bidder bid the next increment above the attorney's bid; had the bidder just bid the "upset price" or a dollar over at first, he would have saved a few hundred dollars! So the "upset price" isn't the starting point, but most experienced buyers won't tick off the bank's attorney by this sort of bidding; they'll bid at the "upset price" or higher, or just keep silent. The bank's attorney gets ticked off for more than just because of the time wasted; the sheriff is paid "poundage" - a percentage of the winning bid - and the higher the bank's bid for a property, the more poundage to be paid.

@Mike H. - the bank will only try to collect what is owed at the sheriff sale, since the sheriff will collect funds over the liens and judgments owed the bank and distribute those overage funds to the other lienholders in order of lien priority. So the bank might be owed more than the debt due to paying for things like property taxes and HOA fees and forced placed property insurance and property preservation (think boarding up windows and winterizing when vacant), in addition to things like attorney's fees, late fees, interest, and missed loan payments.