How Much Do I Bid at a Foreclosure Auction?
A foreclosure auction is the culmination of the foreclosure process, where the court in charge of the foreclosure holds an auction to sell the property. The auction is held either at the courthouse or at the property, depending on state laws; and if it is successful, the lender is given the proceeds from the auction as payment for the defaulted mortgage. If the auction fails -- if no one bids -- then the court awards the property to the lender, which then sells the property on the market. If you are interested in bidding at an auction, then approach the auction carefully and plan well.
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Starting Bid
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First, you must prepare to at least meet the starting bid. Ideally, you will be the only one bidding and you can take the property for the lowest possible bid. But, at times, there are investors and agents who are present and will also bid on the property, raising the price you have to pay. The lowest possible bid is typically just enough to cover the mortgage amount still owed to the lender, and you cannot bid lower than it.
Maximizing Savings
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If you have to bid above the starting bid amount, then you must be prepared to only go up to a certain amount. The point in bidding at a foreclosure sale is to purchase a property at a discount, apart from the market forces to which it would otherwise be subject. Your discount is important, so always try to maximize savings. Have a set amount that you will not bid above, a price that is lower than the market price for similar houses but still within your reach.
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State Laws
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State laws vary when it comes to foreclosure auctions. In many states, you must bring money to the auction and directly pay the auctioneer the entire amount of your bid. People use cashiers checks and other instruments to do this. It can be difficult to collect enough funds to accomplish this, which is why few individuals bid at auctions. Your bid may be controlled in large part by how much money you can raise, typically through financing.
Confirmation
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Once you have made a winning bid, be sure to collect proof of your win from the auctioneer. The auctioneer should have the proper documents, sometimes the title to the property itself, and you must get these documents to actually own the house. Sometimes ownership is immediately transferred, and at other times the court must declare ownership, which can take up to a month. Be aware of redemption periods where the owner can still claim the property after the auction.
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