Foreclosure Property Auctions 

We live in arguably the worst economic time of our generation, and certainly the biggest downturn in activity since the Second World War. This has created unfortunate tragedy as millions have lost their employment, businesses are forced to close down and people lose their homes as banks and financial institutions foreclose on their property.

All these factors have caused an unprecedented rise in the number of foreclosure property auctions here in the States. 

As sad as the human-effect is with these events, it has produced an extraordinary opportunity for real estate speculators to purchase properties at strikingly attractive prices.

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So how does the whole process start for a property to end up in a foreclosure property auction?

If you’re not entirely sure, a foreclosure is the legal event whereby a lien holder/creditor attains an order by the court for the termination of the mortgagor’s right for redemption. In other words the implications, and what we’ve seen over the last few months, is situations where banks have started to repossess property due to owners violating the terms of the loan agreement.

If the foreclosure is final, the bank/creditor/financial institution can dispose of the property and retain the proceeds to pay off the mortgage balance and other miscellaneous legal costs.  

Generally speaking there are two main types of foreclosure. They are:

Judicial Foreclosure: The foreclosures are available in all states and mandatory in quite a few. It simply implies the auction of the property under court supervision. The takings firstly go towards ‘clearing’ the mortgage. Subsequent to this it goes to any other lien holders and, if anything is left, to the owner.

Power of Sale foreclosure: This is only permitted in States if it was originally part of the mortgage documentation. As the name may suggest, it means that the auction of the property can continue without any court supervision. This process tends to be completed quicker and as with judicial foreclosure the payment priority is with the mortgage holder first, then other creditors and then the owner.

The process for properties to come to the stage of being auctioned depends entirely from State to State. The legal structure can be sometimes complex and homeowners are in the position to challenge the foreclosure if they feel they have grounds based on their individual contracts and State statutes.

After all legal proceedings have however been unsuccessfully exhausted by the owner, the bank will go ahead with the foreclosure property auction.

Banks have the propensity to start the prices at the outstanding loan amount. If this balance is significantly lower than the true market value of the property, investors will be smiling.   Market forces may however cause many of the properties to be valued significantly lower than the outstanding loan balance. This will obviously cause headaches for institutions. 

There is a mixed bag of deals in the market when considering property auctions. Certain houses have high outstanding loan balances which will result in unattractive deals for speculators. Others on the other hand have precious few dollars left owed to the bank, which can result in a ‘once in a lifetime’ opportunity for the investor.

Overall the auction market for foreclosure property has become a vibrant market for real estate investors of the last eighteen months, and it will likely continue along this trend for the next two to three years.

Looking for foreclosed property in your area?   If you’re a homebuyer or real estate speculator looking for auctions nearby, I recommend GovernmentAuctions.   They are one of the few platforms on the web that allow their members access to a large database of foreclosure property auctions in all States. A perfect resource if you’re looking for discounted real estate deals. Take a look!