When a property owner fails to make a certain number of consecutive mortgage payments, the lender begins the foreclosure process. Eventually notices of the sale arrive in the property owner’s mailbox and appear in local newspapers. If the property owner doesn’t bring the mortgage payments current, the sale proceeds. Sheriff’s sales or foreclosure auctions, which sell foreclosed property, often occur on the steps of the county courthouse. The minimum bid at the auction usually is the amount owed to the lender.
What happens after the public auction varies depending on state and county rules and laws.
Sale Is Over
At the conclusion of the sheriff's sale, the bids are reviewed, and the highest bidder is given the opportunity to buy the house. Often, full payment in the form of a certified check or cash is required immediately after the auction, although there are some states and counties that allow payments several days to months after the auction. Sometimes the second-highest bidder is offered the chance to buy the property if the highest bidder falls through on paying for the foreclosed property.
Minimum Bid at Auction
If the minimum bid is not reached, the lender owns the property. The bank, mortgage company or other financial institution takes ownership. The lender will then hire a real estate broker to assist in selling the home. Real estate companies and lenders provide lists of real-estate-owned, or REO, property available for purchase and will sometimes post listings of the foreclosed properties in the Multiple Listings Service (MLS).
The Redemption Period
In some states and counties, the owner has the right to redeem the property after the auction. The owner pays the purchase price, late fees, court fees and interest. The purchase price is returned to the highest bidder if the house is redeemed within a stated time period. If the property isn’t redeemed, the highest bidder receives title to the property after a specified time period.
Condition of the House
Often a house inspection isn’t possible before the sheriff’s auction. The property is sold “as-is." Tenants or the property owner might still reside in the home. The highest bidder receives title to the property after the listed redemption period. At that time, the new buyer takes ownership and evicts the tenants, if necessary. The new owner often buys title insurance. This insures the new buyer against loss from title defects. The property purchaser also makes sure the new deed is recorded with the county recorder’s office.