Ohio’s revamping of its foreclosure statutes that went into effect September 29, 2016, does much more than just “Fast Track” foreclosure sales on abandoned residential properties.
The new laws also now require that if a residential property does not sell at the first auction, then a subsequent auction must be held within 30 days and will be conducted with no minimum bid requirement.
Also, Banks that routinely request the appointment of auctioneers to sell foreclosure properties in lieu of the sheriff will see that procedure change with the creation of the title “private selling officers,” who will take the place of court-appointed auctioneers. Courts must appoint the private selling officer if requested by the mortgagor, and the private selling officers’ fees that can be taxed as costs will be limited to 1.5% of the sale price of the property. Anything paid in excess of 1.5% cannot be taxed as costs and cannot be added to the mortgagor’s deficiency judgment, essentially meaning banks must pay any private selling officers’ fees in excess of that amount from their share of the sales proceeds.
The new laws also authorize creditors and lien holders to submit remote credit bids and require a state-wide sheriff sale site so all auctions will be conducted online by 2022.
Below is a summary of the new laws:
VACANT AND ABANDONED PROPERTIES
Foreclosure sales on vacant and abandoned properties can be accelerated if the mortgage holder can submit sufficient evidence to the court that the property is either vacant or abandoned.
After filing the foreclosure, the mortgage holder may file a motion to have the property declared vacant or abandoned. The court will hold an oral hearing on the motion. The court must rule on the motion not more than 21 days after the property owner’s answer date has expired. If the judge declares the property is vacant or abandoned, then the sale auction must be held within 75 days of the court’s ruling.
The court must deny the bank’s motion If the property owner files an answer or objection that asserts a defense that would bar the foreclosure action if proven.
The law specifically sets forth the factors required to prove abandonment. In addition to proving that the bank is entitled to foreclose on the property, the bank will prevail on its motion if it can prove three of the factors, which include: the property appears vacant; utilities have been shut off; windows and entrances are boarded up or broken; the property was sealed by a governmental unit; the property is subject to vandalism; a governmental unit provides a statement that the property is abandoned; and the property owners provide a statement that the property is abandoned.
If a property is declared vacant or abandoned, then the mortgage holder will have the right to enter the property to secure it from further damage.
The new laws require the creation of an official sheriff sale website to accept online bidding for sheriff sales. Starting in September 2017, sheriff departments have the option to list residential foreclosure sales on the website. Starting in September 2022, all residential sheriff foreclosure sales must be conducted on the website, but sheriff departments will also be permitted to conduct dual auctions by continuing to hold auctions at a physical site, such as the courthouse. All online auctions will need to be open for bidding for at least seven days.
PRIVATE SELLING OFFICERS
The new laws create the title “Private Selling Officer” and establish procedures for their appointment in lieu of a sheriff, thereby replacing the practice appointing auctioneers to conduct foreclosure sales. The courts do not have the discretion to deny the appointment of a private selling officer if requested by the mortgage holder. Some judges had the practice of denying the request for an auctioneer until the sheriff conducted at least one sale, and sometimes two.
The new laws will also require the sheriff to obtain the appraisals for the private selling offer and have the order of sale issued. Previously in some counties, auctioneers had difficulty obtaining the required appraisals for the typical cost because either the appraisers typically used by the sheriff would not conduct the appraisals for the auctioneers, or would demand full price of between $500 and $700 per appraisal, as opposed to the $50 to $150 charged to the sheriff.
The private selling officers will have much of the authority that auctioneers had, such as the ability to market the property, but also will have the right to prepare and record the deed after sale. They will be required to hire a title insurance agent licensed in Ohio to assist with the closing. The fees charged by the title agency of $500 or less will be taxed as costs and paid from the sale proceeds. Any amount above $500 must be approved by the court.
As noted above, the private selling officer will only be able to tax as costs his fees and expenses (not counting the appraisal and advertisement costs) up to 1.5% of the sales price. Anything owed above that must be paid from the mortgage holder’s sales proceeds and cannot be added to any deficiency judgment.
Private selling officers must be Ohio residents and licensed as a both an auctioneer and a real estate broker or real estate salesperson in Ohio.
REMOTE CREDIT BIDDING
Judgment creditors and lien holders will no longer have to attend auction sales to submit credit bids. The new law requires sheriffs and private selling officers conducting auctions at physical locations to establish either fax numbers or email address for those creditors to submit their bids. The bid must be for a fixed maximum amount and be submitted by no later than 4:30 p.m. the last business day before the auction.
The initial foreclosure sale requirements for residential property that the minimum bid be 2/3s of the appraisal remains unchanged. However, if the residential property does not sell at the first auction, then a second auction must be held not more than 30 days after the first auction and there will be no minimum bid. The purchaser will have to pay the amounts taxed as costs of the sale and real estate taxes if the purchase price is less than those amounts.
If there are no bidders at the second auction, the new law permits the sheriff or private selling officer to conduct other auctions with no minimum bid without requesting court approval until the property is sold.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.