Legal Definitions - upset bid

An upset bid is a new, higher offer submitted for property that has already been sold at an initial auction or judicial sale, but before the sale has been officially confirmed by the court or authority. This subsequent bid effectively "upsets" or overturns the previous highest accepted offer, reopening the bidding process to ensure the property achieves the maximum possible price. This mechanism is often used in court-ordered sales, such as foreclosures or estate liquidations, to protect the interests of creditors or beneficiaries.

Examples:

• Foreclosure Sale of a Home: A bank forecloses on a house, and it is sold at a public auction for $300,000 to the highest bidder, Ms. Chen. The local court rules allow for a 10-day period during which other parties can submit higher offers. On day 7, Mr. Davis submits an offer of $315,000, along with the required deposit, to the clerk of court.

  This is an upset bid because Mr. Davis's offer is a new, higher bid made after the initial auction but within the legally defined period for challenging the previous winning bid. This action nullifies Ms. Chen's $300,000 bid and typically starts a new upset bid period based on Mr. Davis's offer, aiming to secure an even higher price for the property.

• Estate Sale of Farmland: Following a probate court order, a deceased person's 50-acre farm is auctioned to settle the estate. The highest bid at the initial auction is $500,000 from a developer. The court allows a 20-day period for upset bids to ensure the estate receives fair market value. Two weeks later, a local farmer, wanting to preserve the land, submits an upset bid of $525,000 to the court, along with the necessary documentation and deposit.

  The farmer's offer is an upset bid because it surpasses the initial winning bid for the farmland during the designated period before the sale is finalized. This action ensures the estate potentially receives a higher value for the asset, benefiting the heirs and creditors.

• Bankruptcy Sale of Business Equipment: A company undergoing bankruptcy is liquidating its assets. A specialized piece of manufacturing equipment is sold at auction for $75,000 to a competitor. The bankruptcy court's order specifies a 7-day period for higher offers to maximize recovery for creditors. On day 5, a different manufacturing firm, having missed the initial auction, submits a bid of $80,000 for the equipment directly to the bankruptcy trustee, accompanied by a certified check.

  This new, higher offer is an upset bid. It was made after the initial auction but within the court-approved window for additional offers, thereby challenging and potentially replacing the initial winning bid to maximize recovery for the bankrupt company's creditors.