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Understand how a Foreclosed Auction Works

A foreclosed auction is where all of the homes that borrowers fail to pay on their mortgages go to be sold to the public. That is right. They are sold to the public. This means that you can attend foreclosed auctions and purchase a home if you are interested. It is best to find out which homes are going to be at the sale prior to attending and placing a bid. This is because if you bid on a home that isn't right for you, you will still be obligated to go through with the purchase if you are the winning bidder.

Before the banks actually own the homes they go to a foreclosure auction. The bank first initiates a intent to sell the home with the borrower. This is to tell the borrower that they intend to get the money back for the loan that they gave to the borrower on the home. In most cases, the bank will try to acquire 80% of what they borrowed. If the borrower bought the home with a 20% down payment they are at a loss of the down payment. This means the bank will have borrowed to the person in default an 80% loan which is usually the case. You can expect the starting bid of the home at a foreclosed auction to be 80% of this amount. This means that the houses are actually going for sale at almost 60% of the market value. This is a great way to buy a house.

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