Late payoff wire costs buyer a $425,000 property deal in New York
On June 21, 2024, at 3:15 p.m., the foreclosure auction wrapped up. The successful bidder purchased the property for $53,000, subject to a second mortgage of $65,830.47. Both sides signed a memorandum of sale.
At 4:23 p.m. that same afternoon, the homeowners closed on a separate sale of the property to a different buyer for $425,000. That buyer’s team wired JPMorgan a payoff of $53,478.17, drawn from a payoff letter good through June 20, 2024 – one day before the wire was sent.
The contract buyer moved to intervene, asking the court to throw out the foreclosure judgment and void the auction on the grounds the price was unconscionably low. The lower court in Suffolk County agreed and blocked the auction buyer from completing the purchase.
The appellate court reversed. Under New York law, a homeowner’s right to redeem a mortgage is “extinguished as a matter of law upon the foreclosure sale, whether or not the deed has been delivered,” and once lost, “it cannot be revived, even by court order.” The auction closed at 3:15 p.m. The wire hit at 4:23 p.m. By then, the auction buyer was already the equitable owner.
On the price challenge, the court was equally direct. A low price alone does not void a foreclosure sale. There must be “fraud, collusion, mistake, or misconduct,” or a price “so inadequate as to shock the court’s conscience.” Measured against the auction bid plus the second mortgage balance, the price did not cross that line.
