Why does this foreclosure auction seems so odd?
December 21, 2012 4:01 PM Subscribe
Our house was recently sold at auction due to foreclosure. I'm curious about the details of the sale, specifically the fact that the same bank that owned the mortgage won the auction (bought the house from themselves?) and also that they paid way more than the house is worth.
posted by anonymous to Home & Garden (6 answers total) 3 users marked this as a favorite
My wife and I got a mortgage on a house in 2008 that was worth $289,000. It was the very edge of the housing bubble, so within a year, the value of the property had dropped to around $240,000. Also within that year, we had some life events that caused our cashflow to decrease significantly, which resulted in an eventual foreclosure in May of 2011.
In June of 2011, we moved out of the house and into a rental, offering to give the bank a deed in lieu and let them have the property. They refused, and insisted on foreclosing. Then the property sat - vacant - for the next 18 months while the bank did... basically nothing.
They finally put the house up for auction this month (Dec. 2012) and we recently received a letter from the sheriff's department letting us know that the house was indeed sold at auction. But there were two things that I thought were odd:
1) The mortgage holder was listed as the "winner" of the auction. They basically bought the house from themselves. I was curious as to the reason for this, although I assume it is a paperwork issue to help them resolve having a liability on their books. Right?
2) The winning bid was $330,000. This is $40,000 more than we paid for the house, and (I would guess) almost $100,000 more than the house is worth in today's market. Why would they "overpay?" Was this another bookkeeping scheme? If so, wouldn't the extra money - over and above the mortgage owed - default to us since we were technically still the owners of the property until the auction finished?
I don't know how this stuff works and was hoping someone else could fill me in.
This all happened in the Portland, Oregon area if that helps.