How does the bank or mortgage company determine their upset price at sheriff sale? Do they have to base the upset price on specific criteria or can they pick any upset price they want?
Upset price is the price that the bank is willing to bid to to retain the property at sheriff sale. Not sure about other sheriff sales but in Atlantic county there is a decree, let's say 100,000 and an upset price of let's say 112,000. The upset price is usually higher than the decree but not always. I saw one where the decree was 112,000 and the upset price was 71,000. Bank was owed 112,000 but was willing to let the property go for 71,000. Bid went to 90,000 and was sold at that number.
I've heard the term used differently by different people. Here is how I interpret your question:
There is a point in a foreclosure auction (or whatever process is used in your jurisdiction), a specific dollar amount at which the bank/mortgagee would elect to take back the property as an REO, or, agree to let it be sold if even at a loss. The mortgagee will generally bid up to that amount. If bidding exceeds their 'upset' price by $1, they'll permit the sale.... even if the bidding is less than what was owed on the mortgage.
Years ago, while working as a consultant for a national mortgage loan servicer's VP of loss mitigation (with a portfolio of about 7,000 non performing loans) I would help determine the 'upset' price for all properties to be exposed at foreclosure sale. I did that by performing an appraisal review... comparing the origination appraisal with current BPOs, checking for accuracy, and on ocassion, performing my own market analysis.
Other factors include, but are not limited to PMI, if any, the age of the loan, and the spread between the cost of funds used to make the loan... and the interest rate charged.
For example, if ABC Mortgage charged 8% on a 30 year fixed mortgage loan.... that's 5 years old with little reduction of the principal balance, but only paid 3% for the funds to make the loan, they've already made a ton of money on the loan.
They can afford be flexible.
[ Edited by TheShortSalePro on Date 11/28/2003 ][ Edited by TheShortSalePro on Date 11/28/2003 ]
By your calculations How much is a ton of money? on a 60k loan it cant be much more than 19k how much could they afford to 'upset' it for? they have holding costs too?
Your calculations on Up Set pricing are very interesting. However I have sat in on one or two Loan Committe meetings where a large number of foreclosures were to be delt with and fast as they were upcoming and the market had plotched and the Bank had an upcoming problem.
The only question asked me was, give us a figure in relationship to what the hell is going on out there in the house market. Thats the figure we will stqrt the auction at. You have 73 auctions upcoming have the information in the Trustees hand prior to sale. Now get going. Best judgement call, the assumption being I would come up with the correct figure.
That is what I was hired to do. The Trustee held his sale, all properties were over bid and sold. A follow up check showed that the pricing was indeed responsive to the decending market. That was fun.
Here in Texas at least my experience so far is the trustee bids the amount the debtor owes including attorney fees , late charges, interest, etc. There is no upset price that I have seen. A lot are Huds and Va and I guess PMI. Most are newer loans too and that could make a difference.
The most basic answer to what the bank will take for a property is : What's the property worth to them?
They have the regular criteria that anyone would condition of the house, how much money would it take to get to full market value, how much money they have into it, how much money they received in payments (much like a positive cash flow for landlords), how much can the market bear for a house in this condition (considering a defaulting individual has been living there and much of the maintenance has probably been deferred in adtion to what is obviously wrong with it), and most importantly for them how much time has/will this thing take up from them. for banks even more than individuals time IS money. That is why they are willing to take short sales. In fact an auction is much like a short sale since if the bank has to buy it back it better be very sure of itself since then they have to market it themselves.
In the end it is not unlike a privately held property in some degree - id depends on the person handling it.
...not familiar with (upset price) lingo
Upset price is the price that the bank is willing to bid to to retain the property at sheriff sale. Not sure about other sheriff sales but in Atlantic county there is a decree, let's say 100,000 and an upset price of let's say 112,000. The upset price is usually higher than the decree but not always. I saw one where the decree was 112,000 and the upset price was 71,000. Bank was owed 112,000 but was willing to let the property go for 71,000. Bid went to 90,000 and was sold at that number.
I've heard the term used differently by different people. Here is how I interpret your question:
There is a point in a foreclosure auction (or whatever process is used in your jurisdiction), a specific dollar amount at which the bank/mortgagee would elect to take back the property as an REO, or, agree to let it be sold if even at a loss. The mortgagee will generally bid up to that amount. If bidding exceeds their 'upset' price by $1, they'll permit the sale.... even if the bidding is less than what was owed on the mortgage.
Years ago, while working as a consultant for a national mortgage loan servicer's VP of loss mitigation (with a portfolio of about 7,000 non performing loans) I would help determine the 'upset' price for all properties to be exposed at foreclosure sale. I did that by performing an appraisal review... comparing the origination appraisal with current BPOs, checking for accuracy, and on ocassion, performing my own market analysis.
Other factors include, but are not limited to PMI, if any, the age of the loan, and the spread between the cost of funds used to make the loan... and the interest rate charged.
For example, if ABC Mortgage charged 8% on a 30 year fixed mortgage loan.... that's 5 years old with little reduction of the principal balance, but only paid 3% for the funds to make the loan, they've already made a ton of money on the loan.
They can afford be flexible.
[ Edited by TheShortSalePro on Date 11/28/2003 ][ Edited by TheShortSalePro on Date 11/28/2003 ]
By your calculations How much is a ton of money? on a 60k loan it cant be much more than 19k how much could they afford to 'upset' it for? they have holding costs too?
Your calculations on Up Set pricing are very interesting. However I have sat in on one or two Loan Committe meetings where a large number of foreclosures were to be delt with and fast as they were upcoming and the market had plotched and the Bank had an upcoming problem.
The only question asked me was, give us a figure in relationship to what the hell is going on out there in the house market. Thats the figure we will stqrt the auction at. You have 73 auctions upcoming have the information in the Trustees hand prior to sale. Now get going. Best judgement call, the assumption being I would come up with the correct figure.
That is what I was hired to do. The Trustee held his sale, all properties were over bid and sold. A follow up check showed that the pricing was indeed responsive to the decending market. That was fun.
Reflective Lucius
Here in Texas at least my experience so far is the trustee bids the amount the debtor owes including attorney fees , late charges, interest, etc. There is no upset price that I have seen. A lot are Huds and Va and I guess PMI. Most are newer loans too and that could make a difference.
Hope this helps some
Ted Jr
The most basic answer to what the bank will take for a property is : What's the property worth to them?
They have the regular criteria that anyone would condition of the house, how much money would it take to get to full market value, how much money they have into it, how much money they received in payments (much like a positive cash flow for landlords), how much can the market bear for a house in this condition (considering a defaulting individual has been living there and much of the maintenance has probably been deferred in adtion to what is obviously wrong with it), and most importantly for them how much time has/will this thing take up from them. for banks even more than individuals time IS money. That is why they are willing to take short sales. In fact an auction is much like a short sale since if the bank has to buy it back it better be very sure of itself since then they have to market it themselves.
In the end it is not unlike a privately held property in some degree - id depends on the person handling it.
KP