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Foreclosure Auction Process

There is a process that gets followed at every foreclosure auction. Before the bidding begins, the attorney in charge of the foreclosure proceeding will read a legal statement. This statement outlines the property being auctioned off including, the address and a description of the property. The attorney will also state that you are buying the property as is and the bank that is foreclosing is making no warranties or representation as to the condition of the property. It is important to pay attention to what the attorney is stating. If the attorney mentions he has given the IRS notice of the foreclosure this is a sign that there is an IRS tax lien on the property. If the property has a tax lien on it there is a 120 day waiting period for the right of redemption to end. You could also pay the IRS the full amount of the tax lien if you didn't want to wait for the right of redemption period to end.

It is also possible that some attorney's will also verify that the bidders have their auction deposits before the bidding process begins. Sometimes people attend an auction in an effort to dive the bidding up as high as possible. These individuals are known as a shill. A shill does not plan on buying the property, they just want to drive the price up so the homeowner might get some of the auction proceeding once all the debt against the property is paid off.

After, the legal statement is read, the foreclosure attorney will announce the amount of the opening bid. Usually, the attorney will say something such as, " I have an opening bid from ABC Bank of $193,256 - do I hear any other bids?" Each bidder must say aloud what their bid is. The bidding will continue until there is the final highest bid. At that point he attorney will say something like, " I have a bid of $207,987 going once....going twice....sold for $207,987". The bidding goes very fast and is finished in about 5 minutes.

Once the bidding ends the person with the winning bid will present their auction deposit to the attorney and sign a document that shows they were the winning bidder at the auction. This document or statement is called a "Memorandum Of Sale Of Real Property". This outlines how much time the bidder has before the balance of money must be paid. Settlement on the property is usually within 2 weeks to a month. During that time period you are responsible for paying the interest on the loan that is foreclosing as well as the property taxes. You will continue to pay property taxes until you sell the property but the interest on the loan ends when you settle on the property.

The Memorandum will also outline the procedure should the successful bidder not produce the money within the time period indicated. The deposit given at the auction will be lost if the winning bidder does not purchase the property within the specified time frame.