Disclaimer: This video is designed to be educational and informative, but it is not legal advice. Collection law is constantly evolving and subject to change. Each situation is unique, and each case should be addressed to fit the unique situation.
There are many, many factors in the analysis of what a creditor should bid at sheriff’s sale.
A creditor should consider whether it has waived or preserved its deficiency rights. If deficiency rights have been preserved against the borrower, the creditor will have the burden to prove its ultimate bid price is “fair value” for the property. Clearly, that will influence the bid price by the creditor.
A creditor should also consider whether the debtor may later file a bankruptcy in which the creditor could claim a right to assets. If a creditor bids in its entire amount due at sheriff’s sale, the law presumes that the creditor was then paid in full for the debt.
If the debtor later files a bankruptcy and has assets for distribution, that creditor would be unable to make a claim in the bankruptcy. The creditor’s full amount due bid price satisfied the entire debt.
A creditor should also consider any priority liens against the property. Some possible priority liens would be real estate taxes, assessments or first mortgage holders. Clearly, a bid price consider any of those liens as those costs would need to be paid by the winning bidder.
Lastly, a creditor should consider whether the bank wants to entice other bidders. If the bank is not interested in receiving the property back, it should consider its holding costs and sale costs and make a competitive bid at sale. Doing so may entice another party to bid at the sale.
There are many other factors which may come into play in any particular sheriff’s sale bid analysis. A creditor should discuss this process with their attorney.