In Avoiding the $475,000 Mistake – Entering the Credit Bid attorney John L. Hosack, Buchalter Nemer, and mortgages expert witness Joffrey Long write:
How to proceed with your trustee’s sale:
In the case we referenced above, the total balance of all amounts due on the note was $575,000 and the property value was $500,000. You would open the bidding at $100,000. Instructions would then be issued to the trustee that should there be other bids at the sale, the trustee is to increase your credit bid in increments of $2,000, until either 1) the bidding reaches an amount acceptable to you or 2) you acquire the property. With no other bidders, the property reverts to you in exchange for your “giving up” only $100,000 or your debt. The other $475,000 has not been paid. Through this one simple maneuver, you’ve preserved the ability to pursue the collection of the remaining $475,000 of your debt from insurers, guarantors, or other parties to the transaction.