Real Estate Auctions - 21 Tips
for Home Buyers
by Brandon Cornett
You are probably already aware of
the rise in home foreclosures that
has occurred in recent months. After
all, it has been in the news almost
daily for several months now.
But what you may not know is that
many of the properties that get foreclosed
upon end up being sold at real estate
auctions for less than market value.
What this means to you, as a home
buyer, is that you can often save
a lot of money by purchasing a home
at auction (instead of buying it
through a traditional real estate
With that in mind, I would like
to offer you 21 important points
about this topic. There are some
of the things you should know before
attempting to buy a home at a real
21 Things You Should Know
- The process leading up to a foreclosure
can last up to five months. It
starts when the homeowner defaults
on the loan, but it can drag on
through various stages, depending
on what state you are in.
- Because of this lengthy process,
you need to be flexible, patient
and persistent, all at the same
- At some point, the lender will
file a notice of default against
the homeowner, which formally begins
the process of foreclosure.
- From a legal perspective, there
are two types of foreclosures --
the judicial and the non-judicial.
As you would imagine, the former
takes place in court and the latter
takes place outside of court.
- Most foreclosures in this country
are of the non-judicial variety,
meaning they never go to court
before a judge.
- The non-judicial
variety is also referred to as
a "power of sale" foreclosure.
It allows the trustee to sell the
property more quickly (on behalf
of the lender) by avoiding a court
- During the pre-foreclosure stage,
the homeowner may work with the
lender to get back on track with
his or her mortgage payments.
- Also during this stage, the homeowner
could sell the home before the
bank forecloses on it, typically
through what's known as a real
estate short sale process.
- If the homeowner fails to (A)
get back on track with mortgage
payments or (B) sell the house
via short sale, the property will
move along the path to a real estate
- About 20 days before the real
estate auction is to take place,
a notice of sale will be posted
for public viewing.
- In most cases, the notice of
sale is posted at the county courthouse
(in the county where the foreclosed
property is located).
- In most cases, the actual auction
will also take place at the county
- In addition to the notice of
public sale (which is a minimum
requirement), the lender will announce
the auction event through other
channels as well, because...
- The lender wants a good turnout
at the event, because having a
lot of qualified bidders will increase
the likelihood of a quick sale.
- The lender wants a quick sale
above all else, because they are
losing money and wasting other
resources by keeping the non-performing
(unpaid) loan on their books.
- In true auction fashion, the
attendees will bid on the property
and it will eventually be sold
to the highest bidder.
- After the home is sold, a deed
will be given to the successful
bidder. This person is now the
- The starting price for a home
being sold at auction is normally
based on the amount owed to the
lender (combined with other expenses
the lender might have incurred
when foreclosing on the property).
- Overbidding is a common mistake
among first-time attendees. This
will drive up the price of the
home and defeat the purpose of
buying through an auction. The
purpose for investors is to obtain
a property below market value.
- In most scenarios, attendees
must have financing lined up before
they will be allowed to bid on
a property. For obvious reasons,
real estate auctions are typically
- Most homes sold in this way are
sold as-is with no warranties of
any kind. So if you have the chance
to inspect the property before
bidding on it (even if it's just
a cursory walkthrough), take that
Obviously this article does not
cover everything you need to know
about buying a home through a real
estate auction. Entire books have
been written on the subject, and
you should read those too. But this
article will help you understand
the basic process that takes place,
and therefore shall serve as a good
jumping-off point for your further
With that in mind, I recommend you
print it out and highlight the areas
where your knowledge is lacking.
Then, learn as much as you can about
those areas. Good luck!
About the Author: Brandon
Cornett publishes the Home
Refinancing Blog and several
other real estate websites. Visit
the author online at http://www.mortgage-refinance-advice.com/blog/
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