Tag Archives: Sheriff’s Sale

Sheriff’s sale in a mortgage foreclosure

Are the Courts Open?

As Oklahoma is in the process of reopening after the Caronavirus shut down, it is a reasonable question to ask if the Courts are open.  The answer is — well, that depends?  Which courts and what do you mean by open?

The Federal Court system, which includes the Bankruptcy Courts, has had a paperless filing system in place since 2006.  That means that as a practical matter, the Courthouse no longer accepts paper, and filing by computer doesn’t violate social distancing, so filings have gone on as usual — well, sort of.  I am now reviewing and signing documents by remote using videoconferencing and electronic signatures, but actually filing the documents is the same as it was six months ago.

The Federal system has also moved to allow for telephonic hearings, and it has postponed jury trials and large evidentiary hearings.

The State system, however, is not so simple.  The State courthouses have been closed to the public for more than a month.  Filing of pleadings in existing cases and of new cases continues — by mail, email or fax.  In civil matters, the only hearings being conducted are emergency matters.

All of that is in the process of changing, but every County is proceeding according to its own rules and its own schedule.

What my clients want to know is can they still be sued, what happens if they have a pending answer date, when can a house in foreclosure be set for Sheriff’s Sale?

Those answers aren’t easy, but in most cases court clerk’s offices have been accepting new lawsuits for filing.  However, answer dates have been extended by order of the Supreme Court.  Sheriff’s sales have not been happening, but I am seeing them being reset.  Cleveland County has one set in early June, for instance.  So, if you have had a house in foreclosure, it is worth it to keep an eye on your mail, the court’s online docket and your County Sheriff’s Sale list.


Sheriff Sale Bidding Chaos

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?


Sheriff’s Sale Pricing

I have been watching the bidding habits at Sheriff’s Sales lately.  The first thing I noticed was that I thought some of the appraisals were a bit optimistic.  Then, I realized that Sheriff’s Sales sale prices are higher than market.  Yep, read that one again.  Sheriff’s sale prices are higher than market.

So, who are these lucky bidders who are paying more than appraised value and well above market rate for these houses?   Why, the mortgage companies, of course!

The most extreme example is a case I was watching where the property was appraised at a whopping $16,000 — probably a pretty fair price, actually.  That means bidding opened at around $11,000.  The mortgage company wound up with it — for $87,000+.  No, that is not a typo.  That is extraordinary, but I am seeing fairly regularly the major mortgage companies bidding up to the total amount of their judgments, even if that is more than the property is worth.

Without getting into why on Earth these companies are doing this, to me, as a consumer lawyer this means two things:

1.  No potential for additional liability against the former home owner; and

2.  The possibility that if the mortgage company has improperly padded their judgment amount (and yes, I think it has happened), then, the home owner might be able to force the mortgage company to actually kick back a little cash — would kind of like to try this actually.