Foreclosure Auction

• A foreclosure auction is typically held either on the steps of a courthouse or at the home in question. Different states have varying laws. The auction is held near the eviction of the previous homeowners, and both may be carried out by the Sheriff's department. When foreclosures are common the auctioneer may hold multiple auctions in a row at a courthouse. It is also common for these auctions to be delayed at the last moment as lenders investigate other options. Bidders gather at the auction site wait for news or for the bidding to start.
  
  

Bidding Amount

• The auction comes with a minimum required bid. This bid typically represents how much money the lender is still owed through the mortgage. When bidders pay, they are paying off the lender, through the court, and can claim ownership of the house. However, many states require the bidders to present the full amount of the bid if they win, through checks or a similar type of financial instrument. Investors with buying power frequent these auctions and may have enough money to make the bid, but often no one is present that can raise so much money so easily.
  
  

REO

• When there are no bidders, the house becomes REO, or real estate owned. This means that the court awards possession of the house directly to the lender. The lender must then sell the house on the real estate market to recover any losses. Sometimes lenders approach their REO property with different strategies, such as renting out select houses through property management services. At this point, a real estate agent is needed to manage the transaction.
  
  

Advantages

• REO properties carry several advantages for buyers. Lenders are very anxious to sell the properties as quickly as they can, so they often are willing to accept low purchase prices, leading to good deals. Also, if buyers purchase a house at an auction it is often sight unseen, with all of its flaws and any damage that angry debtors might have done to it before being evicted. An REO can be toured with an agent, so buyers have a better idea what they purchasing.