Most people are not familiar with the term 'short bid'. A short bid occurs when a mortgage in foreclosure goes to Sheriff's Sale and is sold for much less that the balance remaining on the mortgage. For example; the mortgage balance is $250,000 and the lender or another bidder offers $150,000 for the mortgage and it is sold for that price. Now let's assume that the real property value is around $$175,000. The property owner can redeem the mortgage and buy it back for the $150,000 that it sold for plus expenses, usually a small additional amount. Or, the owner can sell the property to someone else and keep the difference at the closing.
There have been many problems for homeowner's attempting to redeem or sell their properties in this situation due to lender's and investor's not providing information to the homeowner to allow them to properly calculate the amount due to payoff the mortgage. However, on December 17th of 2010 H.B. 5267 was signed into Michigan Law giving the Register of Deeds in Oakland County the power to calculate the payoff based on the Sheriff's Deed and provide an avenue for the homowner to sell or redeem the property.
We have handled many of these transactions in the last couple of years and are familiar with the process to complete the sale. While this does put cash in the owner's pocket at closing it does not prevent the lender from pursuing a deficiency judgement at some future date. However, lenders in Michigan have that right even if the property goes through the entire foreclosure process and they take the property back.