Auction Terminology

[Carlton Taylor]

I'm in Northampton County, PA. I've been to a few Sheriff's Sales here and I am trying to get a handle on whats being said. Majority of the properties being auctioned are bank foreclosures. The banks reps will always say something like "$1 plus costs max bid $65k." If costs are $4500 does that mean their opening bid is $4501 or are they stating that there is no point in anybody else bidding unless its over $65k? I'm new be gentle.

[Steve Babiak]

Originally posted by @Carlton Taylor:

I'm in Northampton County, PA. I've been to a few Sheriff's Sales here and I am trying to get a handle on whats being said. Majority of the properties being auctioned are bank foreclosures. The banks reps will always say something like "$1 plus costs max bid $65k." If costs are $4500 does that mean their opening bid is $4501 or are they stating that there is no point in anybody else bidding unless its over $65k? I'm new be gentle.

Yes and yes to both parts of that question. The minimum bid that the sheriff will allow is costs - the cost of conducting the sheriff sale for that property (basically) because the sheriff gets paid first :)

But you can bid in the next bid increment that the sheriff will allow; that would be previous high bid plus $500 in my county. Then you will find out if the attorney is on the ball and ready to out-bid you; you'd be surprised that some attorneys are there and are unfamiliar that they must still enter a higher bid. One time I sat next to an attorney who almost did not out-bid somebody; I nudged him and said you better out-bid any bidder or else that bidder gets a cheap property. I didn't want that property, but I also didn't want that other bidder to make a killing either :). If the attorney makes another bid to out-bid somebody who is underbidding the so-called max bid, then the buyers should just stop bidding unless they are going over that max bid. All too often there are schmucks who waste lots of everybody's time by getting into a bidding war with the bank's attorney with no intention of topping the bank's max bid. 

Now, the reason the banks don't just bid their max bid up front is due to something called poundage; basically, poundage is a percentage of the high bid that gets paid to the sheriff, sort of a commission paid to the sheriff for conducting the sale. Every extra dollar paid out is another dollar the bank loses, so they want to get the property back at lowest possible bid. 

And in some places, rather than saying "max bid" the attorney might say "upset price ".  Both mean the same thing.