When Decisions Matter.

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Bidder Beware

Public sales of real estate by auction bid have been a regular occurrence in the Pennsylvania real estate community for many years.  Pennsylvania courts have stated that “the presumption is that at a public sale the price received is the highest and best obtainable.”  The public sale process has achieved this status in part because the process has been well established over many years.  A significant feature of this well-established process has been the uniformity in the terms and conditions by which the real estate is sold.  The standard terms and conditions historically have always provided that: (1) the premises are sold free and clear of liens and encumbrances; and (2) title will be good and marketable and such as will be insured by any reputable title insurance company at regular rates.

For better or worse, the legal landscape of public sales has changed over the past several years.  To deliver good and marketable title, a seller needs to provide a deed to the buyer with an adequate legal description.  Many terms and conditions of public sale now include language to the effect that any survey required for any purpose must be done at the buyer’s expense.  The seller is, in essence, saying that he will not deliver good and marketable title as it relates to a good and sufficient legal description.

Some terms and conditions of sale omit any reference to quality of title and simply say “the premises are sold free and clear of liens and encumbrances,” which leaves open the question of whether seller has, and can convey, good and marketable title.  In the absence of more specific language, can the public sale buyer refuse to settle on the purchase of the property if the seller cannot, or will not, convey good and marketable title?

What does this mean for a bidder at a public sale of real estate?  Almost certainly the bidder will not be able to change or negotiate different terms and conditions at the sale.  To be sure the bidder knows what he is bidding upon, however, he should obtain a copy of the terms and conditions of sale before the auction and have them reviewed by an attorney.  It may or may not affect how much he wants to bid, but it will provide him with the assurance that he knows upon what he is bidding.

Want more information?  Contact our Real Estate Group.

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