Types of auctions and auction process
How much time do you have before foreclosure auction?
You can act to make an agreement from the listing day until the property is offered for sale at auction. This may take about 90-120 days in different states.
Foreclosure auction methods
There are three types of auction methods:
- Absolute foreclosure auction: Foreclosure property is sold to the highest bidder, regardless of the price. More auctioneers favor this method as it attracts more bidders.
- Minimum bid foreclosure auction: Only bids above the minimum are accepted. This reduces the risk for seller guaranteeing a certain price.
- Reserve foreclosure auction: Seller reserves the option of accepting the highest bid within a certain time period.
You are expected to present 10 percent cash, cashier’s check, money order, or other certified funds at the time of bidding. You must pay the balance in 30 days.
How does home auction process work?
Check your state’s foreclosure law: When your auction bid is the highest, you simply own a controlling interest in the property. Thus, junior liens are still valid (hope that you do not buy junior liens that are wiped off after foreclosure auction). On some occasions, banks holding second liens may buy first mortgage (senior lien) to protect their interests.
If your state has foreclosure process in favor of judicial type foreclosure, your ownership may wait until the end of foreclosure redemption right period (explained later, see definition in the Appendix).
While junior liens are wiped off after foreclosure auction, tax liens prevail. Always check if homeowner has any unpaid taxes.
Examine the terms of foreclosure auction
You must carefully examine the terms and conditions of foreclosure auctions before your participate. Here are some important terms that you need to check:
- Insist on home inspection, including appliances. Take photographs to make sure that every components, appliances, and attachments stay after foreclosure auction sale.
- Make your bid just after the “going twice…” announcement to be more effective and deterrent.
- Make a slightly higher-than-expected offer to shut up your competition if situation warrants. For instance, make $200-dollar higher bid while bidding is going in $100 increments. However, do this when the number of competitors is significantly less than in the beginning.
- Check your competitors: are they patient or excited to keep bidding.
- Finally, never get emotional and never exceed your planned maximum bid.
- Check whether they will give you the title insurance.
More information on foreclosure real estate auctions…
- Rules governing buying and selling homes at auctions
- Reasons for auctions and serious mistakes made
- Government foreclosure auctions