What if Your Property Sells Lower in a Sheriff’s Sale Than Your Amount Owed?

Watching your property get sold to the highest bidder at a sheriff’s sale is generally not a pleasant experience. Sheriff’s sales are the final step in the foreclosure process, where property is sold to pay debts that a debtor owes to various creditors. The proceeds from the sheriff’s sale are used to pay these debts. However, since sheriff’s sales are auctions, sometimes the highest bid for a property will not be enough to pay off every debt owed to creditors.

When properties sold at sheriff’s sales are not sold for enough to pay all debts, those debtors actually end up out of luck. The proceeds of a property sold in a sheriff’s sale pay off creditors in order of priority, so those creditors lower on the list will not get paid if the proceeds from the sale are not enough to satisfy all debts.

If you need assistance, speak to the foreclosure defense attorneys with Young, Marr, Mallis & Associates by calling (215) 701-6519 for Pennsylvania matters or (609) 755-3115 for New Jersey matters.

Do Creditors Get Paid if My Property Does Not Sell for Enough in a Sheriff’s Sale?

If your property sells for less than what your creditors are owed, the creditors are paid in order of priority. In general, creditors who obtained an interest in the property earlier in time get paid before creditors who obtained their property interest later, barring some exceptions like mechanic’s liens. Those creditors who are lower in priority do not get their debts satisfied if not enough money is made from the sheriff’s sale.

What Happens at Sheriff’s Sales?

Whether a sheriff’s sale is happening because of a “tax sale” or after foreclosure proceedings, the process remains largely the same. A property that is being sold to pay for debts is put up for auction, and people bid on it. The highest bidder gets the property, and the proceeds from the sale are used to pay the creditors who initiated foreclosure.

You are also allowed to bid on your own property. If you are the highest bidder, you will re-obtain your own property without any liens or encumbrances. That being said, it is not a good idea to use a sheriff’s sale as a way to get rid of debt, as having a property foreclosed on can still have negative consequences, so discuss your situation with our foreclosure defense attorneys.

What if My Property is Not Sold at All in a Sheriff’s Sale?

If your property is not sold, it becomes what is called “real-estate-owned property.” Essentially, the bank or other creditors get ownership of the property instead of getting paid. It may be surprising to know that this is generally a bad outcome for the creditor. In most cases, the creditor will be a bank or other financial institution. Those entities are not in the business of possessing ownership of errant properties, so they would prefer that the property be sold rather than get possession of it.

Ways to Prevent Sheriff’s Sales

If you are concerned that your property will be foreclosed on and go up for auction at a sheriff’s sale, there are, fortunately, options available to you to prevent that from happening. Each person’s situation is different, so it is best to talk with our foreclosure defense attorneys about what option is right for you and your property.

Right of Redemption

When a property you own is being sold at a sheriff’s sale, you can exercise your “right of redemption.” When you exercise this right, you are stating that you have the entire balance of outstanding debts against you ready to be paid to creditors right away. Of course, it can be difficult to come up with the amount of capital needed to pay off all debts at the same time, so this option may not be practicable in all circumstances.

Injunctive Relief

Another way to prevent sheriff’s sales is to request injunctive relief. Injunctions are court orders that prevent a party from doing something. In this instance, the injunction prevents a sheriff’s sale. In order to have a successful claim for injunctive relief, you must show the court you are more likely than not to win the case if it went to a full trial. Another thing the court takes into account in a request for injunctive relief is whether the requesting party will suffer hardship if they do not issue an injunction. For example, if failure to issue an injunction would result in you losing your home because it is sold at auction, a court is likely to see that as hardship and may be more inclined to give you the injunction to stop the sale until circumstances change.

Bankruptcy

An option to stop a sheriff’s sale from taking place is to file bankruptcy. When someone files for bankruptcy, an “automatic stay” is placed in effect, which prevents any efforts to collect a debt against the person filing bankruptcy. Bankruptcy prevents sheriff’s sales by stopping the foreclosure process so that things never get to that point in the first place. However, you should not think of bankruptcy as a “magic bullet” that can be used without much consideration. Filing bankruptcy can have significant consequences for your credit score, and depending on the Chapter of bankruptcy you file under, your property may be able to be liquidated in any event. Filing bankruptcy is a serious decision that you should discuss with our attorneys before you make it.

Chat with Our Foreclosure Defense Attorneys About Your Case

For any foreclosure or sheriff’s sale-related concerns you have, call Young, Marr, Mallis & Associates’ foreclosure defense attorneys at (215) 701-6519 for Pennsylvania and (609) 755-3115 for New Jersey.