How Do Foreclosure Auctions Work?

Foreclosure auctions are the most common methods of selling foreclosed homes to the public at large. Every month, foreclosure auctions at the county level are held, featuring several homes placed on the block one after the other to interested investors and prospective homebuyers.

A foreclosure auction works by taking an aggregate of foreclosed properties in a given area and providing an auction-style mechanism by which investors and homebuyers can bid. Properties make it to auction after lending companies deliver what are called Letters/Notices of Sale to the homeowner after they have been determined to be in default. The lender will schedule the property for sale at a county auction, usually run by the county sheriff's department (or potentially by trustees or even the courts).

Once properties have been scheduled, an auction notice is put out at least 20 days before the auction is held, in most places. Auctions are frequently cancelled or postponed, so check with the trustee over the property or auction to find out the latest details.

Bidding procedures vary from state to state, but generally speaking, available properties will be listed and you will be able to inspect them beforehand or find out more information if you wish. At auction, interested parties speak to the auctioneer and submit bids. The highest bid wins and the ownership documentation is given to the buyer, provided that they meet the payment methods required by the auction. Most auctions require that a buyer pay in full in cash or cashier's check, or pay a certain percentage down (usually 10%) and the rest in full soon after.

Contact a trustee or the county sheriff's department for more information specific to your local area.