After a property owner misses several mortgage payments, the owner has a pre-foreclosure grace period of a few weeks to a few months -- depending on the state -- to bring the payments up to date and stop any foreclosure proceedings. If the owner does not bring the delinquent payments up to date during the pre-foreclosure period, the property will be sold at a public auction.
Read an Overview of the foreclosure process, which includes links to state laws and other resources.
If the property has been scheduled for public auction, you could still contact the owner for a possible last-minute sale at this point, but if the owner isn't willing to sell, the property will be sold at the auction.
We recommend you always call the trustee or attorney listed on the property, or the clerk of the courts in judicial foreclosure states, to confirm the auction date, because it can be postponed or canceled. If the trustee's sale or sheriff's sale has been scheduled when we list the property, RealtyTrac will post the date, time and location of the sale.
If the property is still scheduled for auction, you should check the title of the property through a local real estate agent or title company. This is recommended because the winning bid may be subject to other liens in some cases. A lien is a legal filing by someone owed money by the owner of the property. Usually the debt has to be paid off before the owner can sell the property.
If the loan in default is the senior lien, then any other liens will typically be cleared out for the highest bidder at the auction (confirm this with a local real estate attorney or the trustee). If the loan in default is a junior lien, then the highest bidder will hold the note to that lien, subject to any senior liens against the property. Determine if it's the senior lien and also factor in estimated repair cost and the estimated market value to determine your maximum bid for the auction.
Bid at Auction
In many states, bidders are required to pay in cash -- usually in the form of a cashier's check -- at the auction. Other states require at least a percentage of the winning bid in cash, with the remainder to be paid with a certain timeframe, typically 30 days. If you're not experienced buying at auction, we recommend that you first attend an auction just to observe or consult a local real estate agent or attorney.
How can I bid on an Auction property at a public sale?
Foreclosure is a legal process that allows a lender/bank to sell or take possession of a property due to non-payment of a loan that is secured by that property. RealtyTrac posts properties that have already been foreclosed (Bank Owned) and properties that are in the foreclosure process (Pre-Foreclosure, Auction). Besides auction properties, buyers have two other opportunities to purchase property during foreclosure.
1. Buying Pre-Foreclosure (NOD, LIS)
2. Buying Bank Owned (REO)