The Florida Supreme Court has been requested to consider a case asking for guidance on the requirements necessary to set aside a foreclosure sale. Generally, a foreclosure sale can be set aside for inadequacy of the prevailing bid at the foreclosure sale. If the bid is grossly inadequate in relation to the value of the property, courts have been able to set aside the foreclosure sale.
However, in the case before the Court, the inadequacy of the bid is not an issue. The issue is whether or not a foreclosure sale can be set aside for mutual mistake. In the case, the lender and borrower had entered into an agreement before the foreclosure sale to modify the loan. Neither the lender or borrower moved to cancel the foreclosure sale and the sale took place with the winning bid made by a third party purchaser at the sale.
Because of the number of foreclosure cases that are pending on civil dockets, the Supreme Court has found that this is a matter of great public importance. If the case is heard and decided in favor of setting aside the foreclosure sale, it could potentially affect thousands of completed foreclosures where the lender did not inform its foreclosure counsel that a settlement was in the works or had been completed (yes, it really happens). It could further affect the time lag between the completion of the foreclosure by a lender and the marketing that property for sale as an REO since lenders may be hesitant to re-sell properties that have a risk of having the foreclosure sale vacated.