Inadequacy of sales price is not enough, on its own, to set aside a Sheriff's sale, at least according to the Appellate Division in a recent decision. In Deutsche Bank National Trust Company, As Trustee, v. Roffman, which was decided on May 10, 2011, the Appellate Division upheld a Chancery Division decision not to set aside a sheriff’s sale, which the borrower challenged solely on the grounds of inadequacy of sales price. Prior to the sheriff’s sale, the borrower did not contest the foreclosure and a final judgment was issued in the amount of $337,290.42. At the sheriff’s sale, the property was purchased for $192,200, a price that the borrower asserted was “grossly inadequate.” Even though Plaintiff had not commenced a deficiency action against borrower, she sought a fair market value hearing on the grounds that the property had been assessed at $376,900 and that she had a competitive market analysis that indicated that the property could be sold for $295,000 to $300,000.
Moreover, the court concluded that the fair market value standard should not be applied when determining whether a sales price is adequate. R. 4:65-6(c) only requires that the property be “sold at its highest and best price at the time of sale[.]” Because a sheriff’s sale is a form of distress sale, courts cannot reasonably expect the production of full fair market value as a result thereof.
Borrower also sought a fair market value hearing pursuant to R. 4:65-5 so that she could not be liable for more than the difference between the fair market value of the property and the mortgage debt. The statute of limitations for a lender to seek a deficiency judgment against a borrower is three (3) months from the date of a sheriff’s sale. N.J.S.A. 2A:50-22(b). The Chancery Division court refused to conduct a fair market value hearing at trial, stating that a hearing would only be necessary in the event that the Plaintiff asked the court to enter a deficiency judgment against borrower. Likewise, the Appellate Division found the issue moot because the Plaintiff did not file an action against the borrower for a deficiency judgment within the statute of limitations and confirmed at argument that it did not intend to do so. Accordingly, fair market value hearings pursuant to R. 4:65-5 are only to be sought by a borrower after a deficiency judgment is brought against it.