In Avoiding the $475,000 Mistake – Entering the Credit Bid attorney John L. Hosack, Buchalter Nemer, and mortgages expert witness Joffrey Long write:
The Other Problem – “Minimal Opening Bids”
The term “minimal opening bids,” refers to opening bids that have no relation to the value of the property or the equity being sold at the trustee’s sale, such as an opening bid of $2,000 on our $500,000 property. Many lenders start with minimal opening bids, then instruct the trustee to increase their credit bid in the event there are other bidders at the sale. The problem with a dramatically low opening bid is that the “Re-statement of the Law-Property Mortgages” (Fn1) states that if it is determined there were any irregularities with the sale, and the opening bid was for less than 20% of the equity being auctioned, a court may invalidate the foreclosure sale. Opening your bidding at a minimum of 20% of the equity being auctioned creates some protection for a beneficiary in the event an irregularity with the sale is later discovered.
Joffrey Long, President of Southwestern Mortgage, chairs the education committee, is a director and is a past president of the California Mortgage Association. He provides litigation consultation for, and is often called upon to testify as an expert in mortgage related litigation matters. See his profile here.