We have advised our readers of the process for bidding at a foreclosure auction sale in New York. Perhaps you have attended the auction, participated and made the highest, winning bid. This post will address what happens next.
Upon making the highest bid, the participant will need to make an immediate payment of ten (10%) percent of the bid price. The auctioneer will provide a written receipt and the parties will sign the receipt. The successful bidder should contact an experienced attorney and provide the Notice of Sale, Terms of Sale and Receipt to his attorney. Your attorney should review these documents to ensure compliance by the successful bidder as well as the party auctioning the property.
Typically, Terms of Sale provide for the bidder to close and receive the Referee’s Deed to the property within thirty (30) days of the auction sale. Failure to do so may result in the loss of the deposit and the auctioning party offering the property to the next highest bidder or holding a second auction. Therefore, the successful bidder should be prepared to pay the balance with readily available liquid funds, without the need to apply for a mortgage. The attorney should order a title report, which will be bound in a title policy at closing, so that no other liens will encumber the property and the status of real estate tax payments is known for adjustment purposes. Then, the successful bidder will have the benefit of title insurance.
It is important for your attorney to supervise the closing process to make sure that the deed and other closing documents are properly drafted. Our attorneys have found that the firms conducting auctions tend to be high volume and not always careful in the production of closing documents. Bidders need to make sure that the block and lot designation and the property description schedule actually match the property being purchased. The Referee who conducted the auction will sign and deliver the Referee’s Deed and other transfer documents at the closing. Afterwards, the Referee will complete and file the Report of Sale with the Court.
The price that a successful bidder will pay at the closing will be dictated by the Terms of Sale. Not only will the balance of the bid price be due at the closing, but tax adjustments and other fees may be due. It is not unusual for the Terms of Sale to provide that the purchaser is responsible for real estate taxes as of the date of the auction sale, even though the actual closing will be thirty days later. If the property involved is a cooperative apartment, the Terms of Sale often require the successful bidder to pay potential maintenance arrears and other fees and charges due to the cooperative and its transfer agent. The highest bidder customarily pays transfer taxes and recording fees applicable to the transaction. Although it is best to engage an attorney before the auction, so that the bidder is aware of the potential charges due above the bid price, hiring an attorney after the auction is also prudent so that the successful bidder only pays what is legitimately required.
Payment requirements also need to be delivered by the party auctioning the property. The balance may be payable to the party conducting the auction, as well as potentially to inferior lienors. The form of payment is also specific, usually by bank, official or cashier’s check.
Our firm regularly advises auction bidders before, during and after the actual auction. We look forward to working with our readers to monitor the auction process and attend closings on their behalf.