10-2306 U.S. v. Buchman

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Property
Foreclosure

Foreclosure sales do not result in inadequate prices as a matter of law.

“Instead of engaging either Wisconsin’s substantive standard or the limits of appellate review, Buchman wants us to assume that, as a matter of law, foreclosure sales produce inadequate prices because they lack a willing seller. Yet Wisconsin has not adopted such a presumption—and for good reason. As long as the auction is competitive, the price will be accurate whether or not the seller has veto power. See Jeremy Bulow & Paul Klemperer, Why Do Sellers (Usually) Prefer Auctions?, 99 Am. Econ. Rev. 1544 (2009); Paul Klemperer, What Really Matters in Auction Design?, 16 J. Econ. Perspectives 169 (Winter 2002); Robert G. Hansen & Randall S. Thomas, Auctions in Bankruptcy: Theoretical Analysis and Practical Guidance, 18 International Rev. L. & Econ. 159 (1998). Self-interested action drives the price to true value. If these parcels really were worth more than $500,000, then the unsuccessful bidders were leaving money on the table. Instead of allowing the land to go for $322,000, another bidder could have offered $350,000 and left room for a handsome profit; someone else would have topped the $350,000 bid. That process would have continued until none of the (losing) bidders anticipated making a profit at a higher price.”

Affirmed.

10-2306 U.S. v. Buchman

Appeal from the United States District Court for the Eastern District of Wisconsin, Griesbach, J., Easterbrook, J.

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