In Avoiding the $475,000 Mistake – Entering the Credit Bid attorney John L. Hosack, Buchalter Nemer, and mortgages expert witness Joffrey Long write:
There’s another possible benefit in starting with a lower bid. Although unlikely in this market, a third party bidder could bid an amount that benefits you more than taking title to the property does. Prepare for this by carefully thinking through the amount at which you’re willing to allow a third party bidder to acquire the property.
A procedure for setting your credit bids might look like this:
1) Take the market value (Fn2) of the secured property and subtract any senior liens.
2) Determine the equity being transferred at the foreclosure auction.
3) Calculate 20% of the equity being transferred as a possible opening bid.
4) Instruct the trustee (in writing) as to your opening bid, increments in which you wish
the bid increased in the event there are other bidders, and your maximum credit bid.
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.