In Oklahoma the Sheriff’s Sale is one of the last stages in the foreclosure process. You will find a general description of the entire Oklahoma foreclosure process on my web site’s foreclosure page. The way Sheriff Sales work, bidding opens at 2/3 of appraised value. Then, the bidding begins. The mortgage company will generally have a representative there to bid on the property. The mortgage company will be bidding with its judgment. What that means is that as long as they don’t bid more than they are owed on the property (including sales costs, attorneys fees, court costs, etc.), then they don’t pay cash for the property. They just exchange that much of their judgment.
So, if the mortgage company is owed a total of $95,000 on a property and buys it at Sheriff Sale for $80,000. Then, at least in theory, the mortgage company can continue to seek the difference (called a deficiency) from the home owner or anyone else liable on the note and mortgage like a guarantor. If the mortgage company bids $95,000, then they can’t collect any more from the home owners; because they aren’t owed any more. What you won’t see is the mortgage company bidding more than $95,000, because then they would have to add cash to their judgment amount. Any other bidder who wins the property must pay cash.
I just checked the Sheriff’s Sale results for Cleveland County, Oklahoma. Twenty-two properties were sold. Of those, twenty were bought by the mortgage company; and two were bought by a 3rd party. Of the twenty bought by the mortgage company 11 of them were bid up to more than the appraised value for the property — in some cases a lot more. One property sold to the mortgage company for $139,007 credit against its judgment. The property was appraised for $95,000.
Bidding, like at all auctions, goes up in increments. So the bidding for the property appraised for $95,000 would have started at $62,700 (2/3 of $95,000). It would then be bid up in some kind of increments until only one bidder was left. In most cases that last bidder was the mortgage company. So, the mortgage company was going beyond appraised value in order to outbid people who would have paid them cash for the properties. What is wrong with this picture?