Closed trustee sale?

Foreclosures, Short Sales, Tax Foreclosures
1

Anyone ever heard of this? If anyone remembers/cares, i have a client whose trying to enforce a short sale purchase agreement, and theres a lawsuit pending and its a whole bunch of legal BS going on that I wont bore anyone with (again). According to the info i have (i havent actually seen a binding document to this effect unfotunately, just a document from the broker saying what counteroffer was), the bank countered my clients offer of 675k with 725k, and my client accepted. Zillow puts the property at 781k (up 42k in the last 30 days, down like 600k for the year, props. in Vista, CA [san diego area])

The big thing is that the trustee sale is looming, on the 16th of this month–and the best thing for the client seems to be to get the thing at the trustee sale. However, he cant bid 1.1mil, which is whats against the prop., and which is what the bank will probly bid it in at (chase bank).

Which brings me to the question- i have heard of something called a ‘closed trustee sale’, which is where the bank agrees with a party that that party will be the only one allowed to bid at the trustee sale, that the bid will be $X, and that the bank will accept the $X. Functionally, its a short sale without a broker/agent, or any contingencies normally found in purchase agreement.

I have sent the proper folks at the bank a few faxes/correspondences about this, and have not heard anything back. Just wondering if anyones heard of
a trustee sale like this, and if so, the best way to obtain one.

The property is in disrepair (appliances torn out, dirty, looks abandoned been lived in innawhile), and the 1+ acre of land has been totally neglected (according to what i hear). Plus, the owner just recently moved in htere with his family.

So basically, were offering like 90%ish of val, taking a house in shitty condition as-is, and saddling ourselves with the burden of getting rid of the tenants, not to mention saving the bank the $ and the hassle of cleanup/remarketing costs. Seems like a no brainer to me, yet no responses…anyone have any ideas??

2

Of course the bank is going to bid the amount of the loan – they have to. Of what value would it be to the bank to accept only one bidder? If the bank wants to deal with only one bidder they can do prior to the auction by accepting a short sale. I’ve never heard of a closed trustee sale and on the face of it, it sounds illegal to me. State law prohibits two or more people conspiring to bid or not bid at an auction. While this part of the law is aimed at bidders, I can see how it could be expanded to include the lender. It would seem to be against the public good. For example, you have a friend at the bank and he agrees that only you will be allowed to bid at an auction. The stockholders or investors of the bank then lost more money since not enough people bid for the property.

3

Hmm… interesting analysis…Im assuming that since no one has said anything yet, that they havent heard of this, which probly means it doesnt exist…

I can see what you mean about against the public interest though… ALthough i dont htink that the shareholders would have a gripe here at all… when a house is way underwater, and everyone knows the bank is going to bid it in at the loan amount, then someone willing to pay market or even more is not going to bother going to the auction,especially if he needs cash to bid with and is planning on financing it. The shareholders dont lose any more by a a ‘closed trustee sale’ than they would in a short sale. Either way, it’d definitely fall under the business judgment rule which nullifies any shareholder cause of action in connection with it, sooo…

The auction law stuff is interesting though, and may apply…I also think it could be against the borrowers interests and may be an impingement on the borrowers rights even, because the borrower may get his ass kicked taxwise if the house goes for like 400k less than the loan, and the bank, by making a deal like that, is basically forcing a de-facto short-sale on the borrower, pretty much trampling the borrower’s rights to not accept a short-sale and the often ruinous tax consequences… Also, theres always a chance some madman would come and bid the loan amount or more i guess (LOL@that obv), and such an agreement would also render this impossible…meh…

Anyways, prolly doens’t exiost since no one seems to have heard of it…guest he guy that talked about it was talkin outta his arse…Bah…