How the sale is run
In a New York mortgage foreclosure, the judgment directs a referee to sell the property at public auction, commonly at or near the courthouse, after notice of the sale is published. The terms of sale, usually available beforehand, govern the deposit a successful bidder must put down and how soon the balance is due. The lender often bids, sometimes up to the amount it is owed. Sales are postponed or cancelled with some frequency, because of a bankruptcy filing, a court order, a settlement, or a defect in the process, so a published date is not a certainty. For an owner, the chance to pay off the debt and keep the property generally ends once the sale takes place.
What a bidder takes on
Property sold this way is generally sold as is, often without an interior inspection. A foreclosure sale typically clears interests that were junior to the foreclosed mortgage and were properly named in the case, but it can leave in place senior liens, unpaid taxes or municipal charges, and problems the referee does not cure. Occupants do not leave because a deed changes hands: former owners and tenants each have to be dealt with through the proper procedures, and tenants have protections under federal and New York law. Before bidding, people usually order a title search, review the judgment and the docket, and confirm their funds, since an auction does not come with a financing contingency.
When the sale is over
After the sale, the referee delivers a deed at closing and reports the result to the court. If the price exceeds what is owed under the judgment, the extra is held and can be claimed in a surplus money proceeding by the former owner and by junior creditors, a step that is easy to overlook. A lender that wants to pursue the borrower for a shortfall has to ask the court, and the borrower can contest how the property's value is measured. Whether you are a bidder, an owner facing a date, or a family member trying to recover surplus, we look at the judgment and the terms of sale first.
