A partition sale is generally subject to court confirmation and overbid although the parties can waive this process by way of a written stipulation.  Experience teaches that these auction sales attract a great deal of public attention and overbids are common.  In fact, a strategy to be considered by the listing broker is to accept a bid somewhat below the expected market price with the expectation that the lower price will stimulate interest and overbids at the courthouse.  This can result in a price that is actually over the expected market price.

While the statutes describe the overbid process generally,  they do not deal with the prosaic issues of weeding out phoney bids, confirming the financial ability of winning bidders, how to handle deposits, relating the deposit to an escrow, the taking of back-up bids and the like.

There is no statutory authority per se for imposing auction rules on the process.  However, it has been found that if a set of auction rules is included in the Report of the Referee (which alerts the court to the existence of a ratified contract and sets up the confirmation hearing), approval of the court to such rules can be obtained in the order approving of the Referee's Report.  Because the Referee has broad authority over the sales process, it is arguable at least that imposing such rules lies within that authority.

It is important that copies of the rules be brought to the confirmation hearing and signed by each of the potential bidders. 

Most courts will conduct the overbid process in open court and that appears to be the process sanctioned by statute.  However, some judges will order the Referee to conduct the auction outside the courtroom either in a jury room or in the corridor.  If this occurs, the rules are particularly important, since as a practical matter the judge may not be readily available to resolve issues that arise.

The rules can be attached to the Interlocutory Judgment, presented to the Court ex parte, or stipulated to by the parties.  Another strategy is to include the rules as an exhibit to the motion for confirmation and specifically request approval by the court.  The Moderator's experience has been that judges welcome the imposition of order and certainty on the process and will approve the rules.

Once the notice of the public sale has been published, the referee will often receive calls from interested parties.  Having the rules in email form, transmitting them in response to such inquiries, and requesting signatures in advance of the confirmation hearing all serve to expedite the process.  The existence of the rules should be announced to the courtroom in connection with the call for bids.

PUBLIC SALE RULES AS APPLICABLE TO (Insert Address or Case Name Here)

Date of Sale:

Place of Sale:  (Insert the detailed location for the public sale in conformity with the court rules.)

1.  The sale will be conducted in open Court by Michael S. Pecherer, the Court appointed Referee in Partition.  All bidders hereby acknowledge that there exists a ratified non-contingent contract for the sale of this property at a price of $(Insert price in contract subject to overbid)..  The buyer in that contract shall be referred to herein as the “Original Buyer.” 

2.  The property is being sold in “AS-IS” condition.  By bidding in this auction sale pursuant to Civil Code Sec. 701.570, each bidder represents to the Court that they have independently inspected and investigated the property to their own satisfaction and are not relying upon any disclosures by any person, or upon any representations by the Sellers, by the Referee in Partition, or by any other person whatsoever.

3.  All bids are absolute and without condition.  No bid may be contingent upon the bidder obtaining financing or upon any other condition.  The successful bidder will have no right of inspection as a prerequisite to completion of the sale.  Copies of a Phase I environmental report may be obtained from the Referee.

4.  Bidders should not assume that the property will appraise for the amount of the bid. 

5.  If there is a winning overbid, the Referee reserves the discretion to accept a back-up bid if the amount of that back-up bid exceeds the amount offered by the Original Buyer by a minimum of $25,000.  If there is not a successful overbid, the contract by the Original Buyer shall be confirmed by the Court.  If there is a successful overbid, but not an acceptable back-up bid, the contract of the Original Buyer shall be deemed to be a back-up bid that shall be proceed in conformity with its terms and conditions.

6.  The call for bids will be in the usual fashion.  Once a bid is made, the Referee will call for higher bids twice and the bid will become final on the cry of “sold” thereafter.  The back-up bidder, if any,  shall be subject to these Rules except that the Referee shall retain possession of the back-up bidder’s deposit check until such time as the winning bidder is declared in default pursuant to paragraph 9.  In the event such a default is declared, the back-up bidder’s deposit check shall be deposited into escrow and shall become non refundable in conformity with Paragraph 7 hereof.

7.  On the day of the sale, the successful bidder must deliver to the Court a cashier’s check payable to (Insert title company name here)  for 10% of the confirmed bid price.  THIS DEPOSIT IS NON-REFUNDABLE AND WILL BE PAID TO THE SELLERS IN THE EVENT THAT THE SUCCESSFUL BIDDER FAILS TO COMPLETE THE PURCHASE SUCH THAT ESCROW SHALL CLOSE AND TITLE TRANSFERRED NO LATER THAN THE CLOSE OF BUSINESS THIRTY DAYS FROM THE DATE OF CONFIRMATION OF THE BID.   The Referee can be reached at (Insert Referee's telephone number).  If there is no qualifying overbid, the sale of the property to the Original Buyer shall be confirmed and shall proceed as agreed.

8.  The first overbid is in the amount of $(Insert the amount calculated in conformity with the statute)  Thereafter, bidding shall be in increments of $(insert an appropriate figure here.  The overbid increments should be in an amount that reflects the amount of the sale price.  For a property selling for less than $1 million, the increments might be $5 or $10 thousand.  For a property selling in the millions, the increment might be $25 thousand) until the property is sold.

9.  In the event that the successful bidder fails to make the required deposit, or fails to close on or before the date specified in paragraph 7, the successful bidder will be deemed to have defaulted and the Referee will sell the property to the back-up bidder or to the Original Buyer. The Referee shall have sole and exclusive discretion to declare the successful bidder in default provided that the exercise of that discretion shall be subject to review by the Court upon noticed motion to be heard not later than 20 days subsequent to written notice of the Referee’s determination.


Signature:_____________________________           Date: ________________

Print Name:____________________________

Contact Information:_____________________