Legal Definitions - upset price

The term upset price refers to the minimum acceptable price for an item being sold, particularly in an auction or a judicial sale (a sale ordered by a court). If bids or offers do not meet or exceed this predetermined price, the item will not be sold, and the sale will be considered unsuccessful.

Here are some examples to illustrate this concept:

• Example 1: Foreclosure Auction

  Imagine a bank is selling a house through a foreclosure auction because the previous owner defaulted on their mortgage. Before the auction begins, the court or the bank might set an upset price of $200,000. This means that even if bidders are present, the house will not be sold unless a bid of at least $200,000 is received. If the highest bid is only $190,000, the property will not be sold at that auction, protecting the bank's interest in recovering a sufficient portion of the outstanding loan.

• Example 2: Government Surplus Sale

  A local government decides to auction off several old, unused office buildings and plots of land that are no longer needed. To ensure they don't sell valuable public assets for a negligible amount, the city council might establish an upset price for each property based on its appraised value. For instance, a specific plot of land might have an upset price of $50,000. If the highest bid received during the public auction is only $45,000, the city will decline the sale, indicating that the property was not sold because the minimum acceptable price was not met.

• Example 3: Estate Sale of Collectibles

  An estate is liquidating a deceased person's valuable coin collection through a specialized auction house. The executor of the estate, advised by an appraiser, sets an upset price for a rare gold coin at $10,000. This ensures that the beneficiaries of the estate receive a fair market value for the item and that it isn't sold for significantly less than its estimated worth. If bidding only reaches $9,500, the coin will be withdrawn from the auction, and the estate will retain it, perhaps to try selling it again later or through a different method.