Foreclosure Auction

A foreclosure is a legal proceeding in which a bank or lender sells or repossesses a property due to the owner's inability to comply with the mortgage or deed of trust payment schedule. Banks and other lenders usually consider a mortgage to be in default when payments have not been made for several months. Now despite being a dreaded word, a foreclosure can actually be extremely lucrative for those looking to invest in distressed real estate. Now that you have an idea of what a foreclosure is, I will go on explain the portion of the foreclosure process known as the foreclosure auction.

Often the owner will try to sell his/her property before the foreclosure auction. However, if the owner is unable to sell the property before the auction takes place, the trustee will auction the house off to the highest bidder. At this time, the bank/lender often pays any outstanding debts such as property taxes or amounts owed to the IRS in order to sell the house with a clear title.

Buying property from a foreclosure auction is an experience unlike any other in purchasing real estate. Although it can sometimes seem to be a risky venture, it can often also very lucrative. So I recommend that, while you try to participate in foreclosure auctions, first-time investors tread carefully. This is because many times a potential buyer might not even be allowed to inspect the property prior to the auction and in addition will likely have to find nontraditional financing to come up with the entire purchase price in cash over a short period of time. Although this is very rare, buying at a foreclosure auction sometimes also comes with at least the theoretical the possibility that the former owner will exercise his/her right of redemption by coming up with the cash to buy the house back within a certain allocated period of time after the foreclosure sale. (Although many jurisdictions do not have right of redemption provisions.) Another warning is that IRS also has 120 days to redeem the property if back taxes are owed. But this rarely happens, and if back taxes are indeed owned, and the bank has not taken care of this prior to auction, you can always calculate it and figure it into your bidding price. The bottom line is that is you should be aware of what I’ve mentioned above, but these same characteristics of a foreclosure auction are what keep many reserved or timid bidders away, and therefore allow you to bid on the property with less completion.

If you decide to attend this type of auction you're probably curious as to where they're held. Foreclosure auctions are typically held at the property's local courthouse or at the property itself (although this is rare.) If you’ve never been to an auction, when a property goes up for foreclosure auction, the competition can initially seem even be intimidating. Don't let this discourage you because purchasing real estate this way is ultimately very lucrative, and that’s why investors and others do it. If you're interested in attending a foreclosure auction I recommend you consider the following:

For the most comprehensive foreclosure auction website on the net, GovernmentAuctions.org is definitely a site everyone should check out.

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