There are two different type of auctions in California. We have the auction on the court house steps to finalize the foreclosure process. Generraly the first lien holder is the one that foreclosres and minimum bid is the balance of the first lien but I have heard of some banks having a lower minimum bid. Often the lien is 80% of the value several years ago but still above today's market value. Purchasing at these auctions have risks due to unknown condition,title issues, and must be paid in full. No loans.
The next form of auction is the public auciton. The banks hire professional auctioneers to sell off 200 properties in a day. It is quite a sight. I have been to one and I do not believe the properties in San Mateo or San Francisco Counites sell any less than current market value. Do keep in mind whatever the final bid a 5% buyers fee is added on to that. Now to your quesiton of what homes go to auction. For the homes I have reviewed in San Francisco and San Mateo Counties it is homes that did not sell through the standard proceedure of listing with a Realtor on the MLS. These homes did not sell generally due to physical condtion and or undesirable location.
I agree with Steve purchasing an REO is a better choice. Much less risk for a similar price. If you choose to try an auction you can have a Realtor represent you. I strongly suggest this. You get their advise, insight knowledge and research at no charge. The auction company pays the Realtor. I am very knowledgable of the peninsula area have some time to help you with REO's invidual or auction purchases.
I can be reached at 877-Lee-Sells (650-358-3959) or email@example.com
According to a Fitch Ratings Special Report on REOs in May 2008, to get properties off their books and reduce long-term carrying costs six out of 10 loan servicers are resorting to auctioning off their REOs now, despite evidence they will likely see bigger losses than if the REOs are marketed and sold in a more traditional fashion. The report goes on to state, "the use of auctions will continue to increase as servicers are faced with growing REO inventories and increasing loss severities." Although losses are typically higher taking an up-front loss at an auction is preferable to taking the time to market a property, the report concluded.
I would wholeheartedly suggest you target REOs - banks are more inclined to "make a deal" once they own the property and are on the hook for prop taxes, insurance, potential vandalism, a dropping market, etc.
REO - real estate owned property