It is common that at a foreclosure sale the mortgagee Bank will submit the winning bid at the amount owed on the mortgage of the property at issue.  But what if the amount owed is significantly less than the “market value” of the house?  Can the court under Wisconsin law refuse to confirm the sale as unconscionable?  The answer in Wisconsin appears to be  – the court can only refuse to confirm the sale  if there is a demand by the Bank for a deficiency judgment and either the price is inadequate due to a mistake, misapprehension or inadvertence or the price is so inadequate that it shocks the conscience of the court.  In other words, if the Bank doesn’t seek a deficiency judgment, then mere inadequacy of price is not a sufficient reason for a court to fail to confirm a sale.  Such propositions were set forth in a recent unpublished Wisconsin Court of Appeals decision, Countrywide Home Loans, Inc. v. Daniel J. Russ, et al, Appeal No. 2009AP2873. 

It’s important to point out that even in cases where the Bank does seek a deficiency judgment against the defaulting borrower, the court must consider “fair value” and NOT “fair market value” when determining whether the price would shock the conscience of the court.  Fair value is considered “what an able and willing buyer will reasonably pay for the property” and is not the same as market value.  See Countrywide at 3. 

 In Countrywide , the Court of Appeals made it clear that since Countrywide Home Loans, Inc. did NOT seek a deficiency judgment against the defaulting mortgagor/owner of the property,  the circuit court erroneously exercise its discretion when it refused to confirm the sale at the amount owed on the foreclosed property.   The Court of Appeals also stated that even if the Bank had indeed pursued a deficiency judgment, thus bringing in to play the determination of whether the price would shock the conscience of the court, the Bank’s bid of $68,674.54 was still “fair value” even with evidence of “market value” of the property at approximately $155,800 or more.  Market value is not the determining factor.