THE AUCTION PROCESS
How much do I need to deposit to bid?
You must make a deposit to qualify to bid at the auction. It is usually at least $5,000 but can be more. It is always specified in the Mortgagee’s Notice of Sale which is published three times prior to the auction.
Can I make the deposit in cash?
While it is permissible to use cash for a deposit, we recommend getting a bank check, certified check, cashier’s check or money order payable to yourself or whoever who is going to bid. If you win the auction, you will endorse the check to the law firm who represents the lender.
How do I find out about second mortgages, attachments, executions, junior liens, IRS liens, MA Department of Revenue liens, MA Department of Medical Assistance liens, outstanding real estate taxes, tax liens for property taxes, or other encumbrances?
The auctioneer cannot provide this information. You must rely on your own research and due diligence.
Will the auctioneer or lender tell me if there are any liens against the property?
The lender will disclose whether it is foreclosing a first or second mortgage. The auctioneer will (may?) have a Municipal Lien Certificate showing amounts owed for taxes, water and sewer, betterments and so forth. If the lender is aware of any IRS or MA DOR liens on record, it will disclose them. But the auction is held without representations or warranties or any kind, and you must rely on your own due diligence to determine what liens are in force against the property.
If I win the auction, do I need to do anything else other than making the deposit?
In addition to tendering the deposit, you sign a Memorandum of Sale, and provide your ID to the auctioneer.
What if I am the second highest bidder at the auction?
If you are the second highest bidder, you are considered the “back-up bidder” and you have the right to buy the property at your highest bid, if the winning bidder defaults and does not close. The auctioneer will contact you in this case and tell you the terms of sale.
What happens if the lender buys the property back?
As a rule, if the lender buys the property back, they will eventually list the property with a local real estate office.
What is the Memorandum of Sale?
The Memorandum of Sale is a binding contract you sign at the auction, if you are the successful bidder. It specifies the terms and conditions of the sale.
Do I need to close in 30 days or can I get an extension?
When you sign the Memorandum of Sale, you agree to close within 30 days from the date of the auction. You agree by signing the Memorandum that “time is of the essence” and you will move promptly to close. Extensions beyond 30 days are entirely at the discretion of the lender or mortgagee. If you do not perform, you could lose your deposit.
What if I cannot get a mortgage?
The Memorandum of Sale which you sign as the winning bidder will not contain any mortgage contingency clause. If you rely upon a mortgage to close, you do so at your own risk. If you cannot close, you could lose your deposit.
Is the auction always held at the property?
In Massachusetts, yes. Other states hold auction sales “on the courthouse steps,” but in Massachusetts, it is almost always held at the property itself.
Where is the closing held?
In the past, the closings traditionally took place at the Registry of Deeds for the County where the property was located.
However, in recent years, closings have taken place “electronically” in which the seller wires funds to the lender’s attorney and the attorney records a Foreclosure Deed into the buyer, also electronically.
What are tax stamps and who pays for them?
In Massachusetts, there is an excise tax of $4.56 per $1,000 of value when you record a deed in the Registry of Deeds. For example, if you bought a property for $180,000, you would pay for a tax stamp of $820.80. This would be in addition to any fee for recording a Foreclosure Deed.
You as the buyer are responsible for these taxes and recording fees.
Who pays outstanding real estate taxes, water and sewer taxes, condominium fees, etc.?
All such items are all the responsibility of the successful bidder.
How can I get the appraiser in?
Unless the homeowner is willing to provide you with access, you will not be able to get an interior property appraisal prior to the closing.
How do I insure the property?
Once you sign the Memorandum of Sale, you as buyer assume risk of loss between the Auction date and the date of the closing. We recommend you consult your attorney and your insurance agent.
Can I do a home inspection, or see the interior of the property?
As a rule, no. We generally do not have access to the property. Unless the owner allows access, we run the auction “from the sidewalk” and sell the property “as-is,” “where-is”.
Do you tell me if the property is on a septic system, or on municipal water and sewer?
No. You must do your own research and rely on your own due diligence.
How do I know where the property lines (metes and bounds) are?
You must rely on your own research. Typically this information can be found on the deed related to the mortgage being foreclosed, but cannot be guaranteed.
How do I know if there is an easement on the property?
Easements are generally recorded at the Registry of Deeds. You must rely on your own due diligence and research to determine if any easements are in effect.
How can I do research on the physical property?
You must rely on your own research and due diligence.
Any information you obtain from Scollay Square Auctions, the lenders, the attorneys, cannot be guaranteed. You are buying the property “AS-IS, WHERE-IS.”
Many auction buyers begin their research by obtaining a “field card” from the city or town Assessor. Others review the “building jacket” at the local Building Inspector’s office. This will generally contain a history of all building permits, and whether a property conforms with its zoning status.
Whether a family is a one-family or two, whether building permits were issued for work done, and similar issues are all the responsibility of the successful bidder.
If I purchase a property at a foreclosure auction, do I get clear title?
The lender or mortgagee is only foreclosing its mortgage, and there is no guarantee of clear title. You must rely on your own due diligence or obtain title insurance on your own.
What happens if there is an IRS lien on the property?
An IRS lien functions more like an option to buy or a right of first refusal, rather than a more traditional lien. In other words, if you buy a foreclosure subject to an IRS lien, the IRS has a right to your purchase for 120 days. The IRS can pay you the amount that you paid for the property and demand that convey the property to them.
What about outstanding condominium fees? Do they go with the property, like property taxes?
As the successful bidder at foreclosure, you are responsible for any outstanding condominium fees on a condominium unit. Under Massachusetts law, there may or may not be a limit to the amount you could be held responsible for. We suggest you consult an attorney.
Can the foreclosing bank or lender provide title insurance?
No, it cannot. You should contact a real estate attorney or a title insurance company directly.
Is there a redemption period in Massachusetts after a mortgage foreclosure auction?
No, because the bank or mortgagee is actually foreclosing the rights of redemption.
How do I tell if the property occupied?
We typically do not know if the property is occupied. You can sometimes learn this information on the day of the sale at the property.
If the property is occupied, will the bank evict the occupants?
No. If the property is occupied, it becomes responsibility of you as the buyer at auction.
Do I get a set of keys when I close?
Occasionally a property will be voluntarily vacated prior to the auction, and if the lender has keys it may be possible to get them. But as rule, no.
What if the prior occupants have left personal property in the house?
In this case, it is your responsibility. We suggest you consult an attorney and remove it according to law. This applies to any automobiles which are left on the site.