Understanding What Happens At A Foreclosure Auction

Understanding What Happens At A Foreclosure Auction

A foreclosure is a situation, where a money lender or a mortgagee takes control over a mortgaged property, when the mortgagor is unable to make payments to payoff the mortgage. It's one opportunity where people can buy real estate properties for a lower market value if they have funds to pay cash for a house. Most people buy properties from foreclosure auctions with the intension to live in it, rent it out or flip it for a profit.

Where we live in Alameda County, California, our County Recorders Office allows people to come into the office and use public computers to do all the research we want about any property in the County. Those are the records for all the real estate in the Cities in our County. We can't go to a City such as Dublin, San Ramon or Pleasanton, as everything is recorded on a County level, not a City level. We can search for Notice of Defaults and Trustee Sales to chase Foreclosures. We can even see the Trustee's Deed which were recorded after an owner lost their home at the Foreclosure Sale (Trustee's Sale) at the Courthouse steps.

At a foreclosure auction, you will notice a bank taking the mortagors (homeowners) property into possession due to lack of payments. Since banks do not indulge themselves into the real estate business, they sell the property as quickly as they possibly can. All that the bank is concerned about is instant cash, and hence you could find properties being sold for a lesser market value. A bank doesn't act like an investor or a homeowner who would try to gain maximum benefits out of a property, it just tries to recover the money lent out. If you are interested in visiting a foreclosure auction, you can check out your local newspaper for Notice of Trustee Sales, or check with the County Recorders Office for Notice of Defaults.

Many a times you will notice that properties being sold at a foreclosure auction, have other liens on them other than the mortgage. So you might want to do a thorough research before you attend the auction. It's a good idea to make a note of the property value in the surrounding areas, types of homes being sold in that area etc. Cross confirming prices from the people living in the nearby areas and from real estate will help you judge the actual price of the property. You need to consider the condition of the property as well, so that you can estimate the cost of repairs and include it in your bid price.

Before the auction can begin, you'll find an auctioneer who will give you a legal description of the property after which the actual bidding takes place. People attending the foreclosure auction are asked to prequalify themselves before they can start bidding. To qualify in most States, you have to bring a Cashier's Check to bid, some States require just $5K to bid and the balance in 24 hours, while other States require that the entire winning bid amount be provided in Cashier's Checks. Just like any other auction, the auctioner tries to raise the bid after an opening bid has been placed. At the end of the auction, the person with the highest, buys the property. If no one bids, the banks takes the property back, and it is now known as an REO Real Estate Owned.

Once the auction is over, the Attorney signs a "Trustee's Deed" and a short story of how the process was completed; he then records it at the County Recorders Office. The new owner (winner of the auction) will usually change the locks if the house was vacated and take control of the property. If they previous owners are still in the property, the buyer must then complete the eviction process to get the owners out.

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