November 14, 2008 Sheriff Auction Sales

At this past Friday's auction something interesting happened that hasn't happened for many months. A property that was being actively bid on wound up going back to a bank. It was bid above the judgment awarded, but Bank of America couldn't let it go. 

The property was 62 Roosevelt Street, Cresskill, NJ. The foreclosure judgement of $184,643.38 awarded to Woori America Bank, Successor by Merger to Hanvit America BankWoori America Bank, Successor by Merger to Hanvit America Bank. The winning bid at auction was $215,000 made by Bank of America N.A. Foreclosure Dept. NCA-105-02-63. That's about 16% above the judgment. The house was last sold in February, 1995 for $162,000, or 32% less than the winning bid.

Bank of America was one of the defendants in the lawsuit, as was the State of NJ. That indicates that Bank of America also held a lien on the property that was subordinate to the Worri America mortgage. The State of NJ could have been named for a variety of money owed to the state. Had Bank of America not bid for the property, the winning bid would have to have exceeded Woori America Bank's judgement, and possibly the amount owed to the state, by enough to cover what they would be willing to accept for the loan.

This is a case where the property was purchased more than 10 years ago, before the bubble, so the amount of the primary judgment was well below current market value. So that gives the junior lein holder an opportunity to recoup some or all of their money. It's the same situation that makes investors more likely to bid on a property. Other lien holders have a bigger incentive though. An investor at a foreclosure auction doesn't lose anything tangible if they fail to win the auction. All they lose is the potential to make money from the deal. A junior lien holder stands to lose the balance still owed on their loan. So they might bid more aggressively. They aren't necessarily bidding to win the property but they have to counter bid to where there are enough surplus funds (amount of winning bid over judgment) to satisfy some or all of the money owed on their loan.

One thing a junior lien holder can also do is purchase the superior lien before the auction. This might be a good situation to do something like that. Before the auction, they could buy the line for at or below the judgment from Woori. That way they hold both liens, and possibly got the first at a discount so even if they don't win the auction, they still are in a better shape. By the way, you can do the same thing yourself if you have the money to do so. I'll give some more details about how this works in another post and I'll provide a link here.

OK, off to the summary.

There were 18 properties scheduled for auction but only 7 were up for bid. One was sold to an investor and the other we discussed above.

81 Chestnut Street, Garfield, NJ 07026 had a winning bid of $228,000 by 81 Chestnut Land Trust , c/o Carolyn Blosio as Trustee. The judgment awarded to U.S. Bank National Association, as Trustee for Credit Suisse First Boston CSFB 2006-1 was $380,398.72 and the home last sold in 1994 for $116,000. The winning bid was 40% below the judgment. The Zestimate range as of today is $321,950 - $452,100.