Foreclosure Sales Prices Matter
Your clients may have the legal right to foreclose on a delinquent owner’s property, but that doesn’t mean they should — especially if the sale price is disproportionately low. That approach could backfire, with the sale overturned by the courts.
A recent ruling from the South Carolina Supreme Court (Winrose Homeowners’ Ass’n v. Hale) drives this point home. The Court found that the sale price was far too low to pass muster.
The homeowners in the case bought their home more than 20 years ago and had accrued more than $60,000 in equity in the property. According to the Court, the home had a fair market value (FMV) of $128,000 at the time of the sale.
After they failed to pay $250 in dues, the HOA foreclosed. A third-party buyer purchased the home in a judicial sale for about $3,000, which the Court described as “a pittance.” Despite the sale, the owners continued paying their mortgage; the buyers made no effort to assume the debt.
The owners challenged the judicial sale, arguing the winning bid was grossly inadequate compared to the property’s FMV. After the lower courts rejected this argument, the case reached South Carolina’s high court.
The Court focused on whether the amount of the sale was so low as to “shock the conscience,” says David Wilson, who heads the South Carolina community association department at the law firm Black, Slaughter & Black, P.A. “Basically, should the Court set aside the sale because the bid amount was so low that it shouldn’t be allowed?”
The Court explained that two methods are used to determine whether a winning bid is grossly inadequate.
To see the two methods the Court applied here, and why, read our new article: When Is a Foreclosure Sale Price Too Low?