Setting of the Upset Price in NJ

[Joseph Glazer]

Curious to see what others think about this situation. I was at a foreclosure sale in New Jersey. A property was sold that I had no interest in buying, but some things about the auction of that property concerned me. The sale was of a property in a mobile home type development. The Condo/Homeowners association was foreclosing for unpaid assessments. The amount owed was less than $5K. The value of the property seems to be around $40-50K, could be a bit more or less depending on the condition of things. The foreclosing homeowners association set the upset price at $150,000, which seems to me to have absolutely no connection to the amount owed or the value of the property. 

A the auction, the attorney for the homeowners association stood up, said a few things, said the upset price was $150K, and sat down. Someone bid $4 or $5 thousand, which was over the amount actual owed under the foreclosure judgment. The sheriff's office representative attempted to shut the bid down by saying bidding had to start at the upset price. The bidder told him, no, the foreclosing association is free to bid against him, but there is no obligation that he start at the upset price. Eventually, the homeowners association buys the place for about $10K. Also, the sheriff allowed the homeowners association to walk out without paying the required 20% deposit. The same bider objected and the sheriff rep. said they were the owner of the property and didn't have to pay, then quickly moved on to the next property. Can't come up with any acceptable excuse for that.

I have an issue with the upset price in this case. Are there any restrictions or requirements as to how the upset price must be set? It seems to me that in this instance, the upset price was set at an amount so high that it designed to stop anyone from bidding on the property, and not connected to the amount at issue for the bank. If all had gone according to plan, no one would have bid against the homeowners association and they would have bought the property for $100. They then get to turn around and sell it on the open market and make a very tidy profit. Am I missing something? It seems like the only purpose of the upset price was to scare away other potential bidders.