All Forum Posts by: 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.

A property I am looking at is coming up for foreclsoures sale soon. There is 1 mortgage and I expect the upset price related to that mortgage to be about $200K (including late fees, attorneys fees, etc.). In researching the property, a judgment was recently entered againt the defendant-debtor in a completely unrelated case (car accident). That judgment was entered into the NJ statewide judgment database. My understanding is that such a judgment in NJ automatically attaches to the defendant-debtor's real property in the state. My question is - what happens if the property is sold at foreclosure as it is going to be. Does the separate civil judgment stay with the property or is it extinguished like other liens subordinate to the first morgage would be? I believe it is extinguished like the others. Thank you for any thoughts.

@John Slater @Chris Seveney Thank you both for your thoughts.

Thank you, Anthony. It is actually a foreclosure on the property by the second mortgage holder, not a sale of the note. Title will transfer to whomever buys the property at auction. When a first mortgage holder forecloses, that extinguishes all junior liens. When a second mortgage holder (or junior lienholder) forecloses, I am trying to make sure I understand the obligation to the 1st mortgage holder, which is not extinguished by the foreclosure sale.

Just trying to make sure I understand the mechanics of a foreclosure auction when the holder of the 2nd mortgage is the one foreclosing. Assume the following facts - 1st mortgage with $150K principal remaining and a 2nd mortgage with $50K principal remaining. The holder of the 2nd mortgage forecloses and the property goes to sherriff sale. Assume that the holder of the second mortgage has an upset price of $60K, so that is the maximum he will bid at auction. If I were to bid $61K and win the auction, my understanding is that I own the property subject to the 1st mortgage. I can then payoff the 1st mortage and I will own the property free and clear (assuming their are no other liens or debts that are attached to the property). Am i correct or am I missing something? Thanks for any insight.