Part of the foreclosure process involves selling the property to recoup the loss. Generally, foreclosure auctions take place at the county courthouse. The trustee, sheriff or county official, such as the tax collector, usually conducts these auctions depending on what type of properties are for sale. Each courthouse conducts the auctions based on their own schedules and state laws. The properties for sale at these auctions are often sold at bargain prices. If you're thinking about placing a bid, do some research before going to the sale to understand your county's specific process.
Homes and properties end up for sale at a courthouse auction because the homeowners either defaulted on their mortgage loan or failed to pay their property taxes. Typically, the mortgage foreclosure process begins after about three months of missed payments. The tax foreclosure process depends on where you're located, as the laws vary by state and county. The homeowners must be notified, per state guidelines, about the pending foreclosure first and if no payment is received or other arrangement is reached the property will be placed up for sale at an auction.
Courthouse foreclosure auctions are commonly required to be advertised for a certain period of time leading up to the date of the sale, usually three weeks. Typically the advertisement is published in a local newspaper. It will include some details about the properties, like their address or parcel number and the starting bid amount. The sale information is also usually displayed at the courthouse in an area for the public to see. In some situations, a notice of sale might also be posted on the actual property itself.
If you plan to bid on a property at a foreclosure auction, you'll probably need to register in advance. However, because each courthouse has it's own processes you will need to contact your specific courthouse directly. On the day of the sale, potential buyers can bid on the properties they wish to purchase. In most cases, full payment is required at the sale or by the end of the business day. You should come prepared with a cash payment or certified funds. If you are the winning bidder, a deed is prepared to grant property ownership to you.
Rights of Redemption
Depending on your location, it might take a few days or weeks to get the deed and become the rightful owner. However, some states allow for the previous owners to redeem the foreclosed property in certain situations. While the laws vary, the redemption period is generally one to three months after the auction sale takes place. If the homeowner can pay the past due amount plus fees in full, they can regain ownership of the property. If this does occur, the buyer is paid back and won't own the property anymore.
You should take some time to learn and understand your county's specific process prior to entering a bid in the sale. The majority of the properties sold through foreclosure auctions are sold "as-is". There may be issues with the home itself, such as structural damage, or issues on the property's title. Another problem might arise if the previous owners refuse to vacate willingly. You might have to go through the court system to have them formally evicted.
- Prudential: Auction Foreclosure FAQ’s
- Realty Trac: Foreclosure Laws and Procedures By State
- Nolo: How Foreclosure Works
- Philadelphia Sheriff's Office: Everything You Need to Know About Sheriff's Sales
- Auction.com: How to Bid in a Foreclosure/Trustee Auction
- Realty Trac: Crapshoot on the Courthouse Steps
- Buncombe County North Carolina: Tax Foreclosure Sales
- Bravo Group: Buying Foreclosures at Trustee Sales / Courthouse Steps Auction in Georgia – Early Learnings
- Greenstein, Rogoff, Olsen, & Co., LLP, CPA's: Foreclosure Investing - Understand The Right of Redemption
- Stockbyte/Stockbyte/Getty Images