The State of New Jersey
NJ Department of Banking and Insurance

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Property Auction Websites and Short Sales

The Commission has received a number of inquiries and complaints from the industry involving certain lenders and programs they have implemented using auction websites when the property of one of their borrowers has been listed as a short sale. Specifically, these lenders utilize the services of auction website companies as part of their value verification system in instances where short sale properties have received a contract of purchase, to verify that the loan investor has received the best price. Once a contract of sale on a short sale property has been submitted for approval, the auction website will post the property to attract other buyers who may be willing to purchase the property at a higher price.   Consequently, the original buyer who has submitted a contract to purchase a short sale property may not, in fact, be the ultimate purchaser of the property if another buyer outbids the original offer at auction.  In addition, if successful at auction, the higher bidder will pay a buyer’s premium. 

This process has raised a host of concerns for the listing agents, perspective purchasers and the sellers of the homes.  While certain lenders and auction sites conducting business in New Jersey  have been found to be in compliance with governing statutes and regulations at this time, agents who are working with sellers and buyers of short sale properties should inform their clients of the potential risks of short sales.  Due diligence with the seller’s specific lender as to their practices related to short sales should be explored.  If the lender does require a seller to participate in a value verification program in a short sale, this should be disclosed in the listing and with potential purchasers.  Those agents who are working with purchasers of short sale properties should also alert their clients to the potential risk. 

OPRA is a state law that was enacted to give the public greater access to government records maintained by public agencies in New Jersey.
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New Jersey Department of Banking and Insurance