FAQ’s on Foreclosure Procedures

With the rising volume of homes in foreclosure, many savvy investors will look to purchase a home at a foreclosure sale. For many, bidding at a foreclosure sale is a new experience and often an intimidating one. Below is a list of frequently asked questions regarding the foreclosure sale process.

What happens at the foreclosure sale?
The foreclosure sale is a public auction conducted on the property. Prior to the auction, qualified bidders register with the auctioneer and are given a bidding number. The auctioneer will read aloud the Mortgagee’s Notice of Sale and the Memorandum of Sale. The auctioneer then asks for an opening bid commencing the auction with the auction closing once all bids have been placed and the property is sold to the highest bidder. The successful bidder will then be asked to sign a Memorandum of Sale outlining the terms of the closing.

How can I qualify to bid?
The notice of sale published in the newspaper (usually the ad is ran 3 consecutive weeks prior to the foreclosure sale in the local town paper) sets the amount needed to bid (typically $5,000.00). This is a nonrefundable certified or bank check or cash deposit that is given to the bank as assurance that the property will close. The check can be made payable to yourself and endorsed if you are the successful purchaser.

How do I know how much to bid?
That is up to you. Research as you would a conventional offer to purchase property factoring in such things as the real estate market, the neighborhood and prices of similar properties in the area, etc.

What is the bank owed on the Mortgage?
That balance owed on the current mortgage is private information of the Mortgagor and cannot be disclosed. However, the original amount loaned by the Mortgagee is public record and can be obtained from the County Registry of Deeds.

Can I purchase the property from the foreclosing Mortgagee prior to the foreclosure sale?
No. Prior to the foreclosure sale, the Mortgagee holds only a mortgage on the property and does not own the property itself. Since the Mortgagee doesn't own the property, it cannot sell the property prior to the foreclosure sale.

Can I inspect the property prior to the foreclosure sale?
Generally, no. As stated above, prior to the foreclosure sale, the Mortgagee does not own the property and, therefore, does not have legal authority to arrange for and permit inspections of the property. The day of the foreclosure sale, the Mortgagor may allow bidders to inspect as it is in his best interest to allow the property to sell for as high a price as possible reducing any deficiency.

How long do I have to pay the balance of the purchase price?
In most foreclosures, the terms of the Memorandum of Sale state that you have 30 days from the date of the foreclosure sale to pay the balance of the purchase price. Extensions can be granted at the Mortgagee’s discretion.

What if I cannot complete the purchase?
The deposit given at the foreclosure sale is forfeited if you are not able to complete the process. The second highest bidder is typically contacted to purchase the property at his bid amount.

Who has the responsibility for evicting the occupants?
As the successful purchaser of the property at a foreclosure sale, it will be your responsibility to conduct a summary process action against the former owners or tenants.

Am I liable for any outstanding taxes or liens?
The successful purchaser at the foreclosure sale is purchasing the house “as is” and is liable for any outstanding water, sewer and real estates taxes. A copy of the Municipal Lien Certificate can be obtained from the town records office listing the outstanding real estate taxes prior to the foreclosure sale.