A bank foreclosure auction is a public sale of a home that has been repossessed by a lending bank. When a homeowner defaults on their bank-sponsored mortgage, a provision in the mortgage allows the lender to take steps to repossess and sell the homeowner's property as a means of collecting the outstanding debt owed. This process can take several months, but unless the homeowner can raise the money to pay off their debt before a schedule sale date, the bank will auction off the home and use the proceeds to cover the money lost on the unpaid loan.
A bank foreclosure auction will either be presided over by a trustee of the bank or a public servant, such as a county Sheriff, depending on the rules of the state in which the foreclosure takes place. At the public auction, anyone may attend and place a bid. Often times, in the weeks leading up to a bank foreclosure auction, potential buyers will have a chance to view the property. On the day of the sale, the property will be awarded to the highest bidder. Often times, the amount of the winning bid will be anywhere from 10% to 50% below the home's actual value. This happens for a number of reason, mostly having to do with demand and the bank's desire to sell the property for a low price in order to encourage a quick purchase so they can recoup their losses.
Buyers often like bank foreclosure auction homes because they provide a fantastic value on a new home, earning them instant equity and investment potential. Bank foreclosure auctions are very common and happen all the time, in every state.
If a home does not sell for a high enough price at auction, the bank will retain possession of the property after the sale, and seek to sell it through other means. At this point, the homes unsold at bank foreclosure auction become bank-owned homes or REO (real estate owned) properties. They will remain in the bank's possession until they are able to sell it to a buyer for a price they deem valuable enough, which is still often below the actual market value of the property.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.
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