Upset bid: A bid in an amount greater than the buyer’s bid, so the sale will be set aside.
Upset bid: An advanced, increased, or raised bid offered to purchase property sold for an amount exceeding the reported sale price or last upset bid by a minimum of five percent.
Upending the Foreclosure Sale by Entering an Upset Bid
An upset bid is entered after a judicial sale before the confirmation of the winning bid. The improved bid will upset the sale and allow the upset bidder to claim the property or compete at a new sale.
In Wake County, North Carolina, for example, “Successful bids lie open for a 10-day period to allow for the submission of upset bids. The minimum amount accepted for an upset bid is 5% of the original bid amount, or $750, whichever is greater. Upset bids are made with the Clerk of Superior Court, located on the 1st Floor of the Wake County Courthouse. Information regarding bid status is not provided over the telephone.
“In the event the successful bidder refuses to accept the deed and honor the bid, the deposit will be forfeited and applied toward defraying costs and expenses. This in no way restricts or limits any other remedies that may be available against a defaulting bidder,” according to the Wake County Revenue Department.
In North Carolina, in the ten days following the foreclosure sale, upset bids can be entered by going to the courthouse and completing a form with the Clerk of Superior Court. The bidder must increase the bid by at least 5% and put down a deposit of 5% of the new bid. The deposit initiates a new upset bid period, which runs for 10 days. If no new bids are entered, the sale will be confirmed to the high bidder and the rights of the parties will go into effect.
Following the entry of the upset bid, “The clerk must notify the trustee when an upset bid is made. After receiving notice from the clerk, the trustee must mail a written notice of the upset bid to the last prior bidder and the current record owner of the property. Id. When an upset bid is made, the last prior bidder is released from any further obligation on account of the bid and any deposit made by the prior bidder must be returned.
“The 10-day upset bid period is sometimes referred to as the borrower’s right of redemption. A power of sale may be terminated if the underlying obligation is paid off, including expenses incurred with respect to the foreclosure, prior to the expiration of the upset bid period. Therefore, after the sale has already taken place, the borrower still has the right to redeem the property until this period of time expires. Consequently, if the borrower or owner files a bankruptcy within the upset bid period, the sale is deemed void given that the sale was not considered final.
“A bankruptcy filing by the owner or borrower will stay the foreclosure proceedings. If a bankruptcy petition is filed subsequent to the clerk issuing an order authorizing a sale, and before the rights of the parties to the sale became fixed, and thereafter the stay is lifted, the trustee is not required to have another foreclosure hearing. The trustee can proceed to sale on the property by posting, publishing and serving notice of the sale pursuant to the provisions of N.C.G.S. § 45-21.16A, § 45-21.17, and §45-21.17A. Id,” according to Raleigh attorney Lawrence S. Maitin.
Foreclosure sales can also be interrupted by filing a Chapter 13 bankruptcy before the upset bid period ends. The Chapter 13 bankruptcy enacts an automatic stay, which halts the foreclosure process.