i live in florida and have a house up for foreclosure auction. why does the bank bid on the house when they can own it without auction?

Asked by Randy, Royal Palm Beach, FL Thu Mar 3, 2011

My brother wants to bid on my foreclosed house but has noticed that 95% of the bids are won by the plaintif representatives. Why does the bank bid on the house when they can own it without auction and how can this be legal? They out bid the other potential buyers, without having to put up real money. Paying the money, which then gets paid back to them doesn't seem right. Can someone please educate me.

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Jennifer Her…, , Royal Palm Beach, FL
Thu Mar 3, 2011
Hi Randy,
You may be seeing where the bid was won by the plaintiff because any bids placed on the property if there were any, were not enough to satisfy the costs accrued. At that point the property reverts back to the plaintiff or bank.

An REO (Real Estate Owned) is a property that goes back to the mortgage company after an unsuccessful foreclosure auction. You see, most foreclosure auctions do not even result in bids.

Foreclosure sales begin with a minimum bid that includes the loan balance, any accrued interest, plus attorney's fees and any costs associated with the foreclosure process. Since what is owed to the bank is almost always more than what the property is worth, very few foreclosure auctions result in a successful sale. Then the property "reverts" to the bank. It becomes an REO, or "real estate owned" property. The bank or servicer will then sell it as part of a pool or an individual property through our local MLS, where your brother will have a chance to make an offer on it.
Good Luck and feel free to contact me with any further questions.

Jennifer Hernann
RE/MAX Prestige of West Palm Beach
4 votes
That's just what happened to my home on Tuesday. The only difference is, I have a V.A. loan. I had to stop paying on the home because we had a fire 3 1/2 years ago and we are still fighting the insurance company for coverages.
Flag Thu May 7, 2015
Corey Buck M…, Agent, Jacksonville, FL
Fri Mar 4, 2011
In my experience, when I am at the courthouse and the home is called for auction, the Bank's representative is located and will show you a minimum bid number that must be exceeded. It is common courtesy to then only bid if it's your intention to exceed that amount. That way, if there are no other bids, the home is sold for $100 to minimize the banks doc stamp fees incurred with a winning bid. While your brother is looking, ask him to calculate the % of homes that the bank won at auction that were over $100. That will give you a better representation of the bank actually bidding on homes.
1 vote
Alma Kee, Agent, Tampa, FL
Fri Mar 4, 2011
If your brother has ALL CASH to put up for the full price of his bid (within 24 hours, no time to get a mortgage) the lender may actually permit the courthouse auction to sell below the outstanding amount you owe.

The real question is why not try to do a Short Sale? If you do not, the lender can file a deficiency judgement against you for 100% of their loss, including attorney fees, court costs, late fees, etc.

If you are able to get a Short Sale under the HAFA program you may also be able to get a check for $3k at closing. Most importantly HAFA required that you will be forgiven 100% of the loss. Here are details:


Do you really want the bank to repossess your car and attach your wages? Contact a Realtor and your "servicer" for your Lender, immediately and try to stop the foreclosure auction!

Hope this helps.

1 vote
Tom Priester, Agent, Tequesta, FL
Fri Mar 4, 2011

The bank participates in foreclosure auctions to protect their interests but are not bidding with real money. The Plaintiff (bank) has a final judgement and usually will set a price that they are willing to bid up to but put out no money to do so unless they bid higher than the judgement amount. As an example, lets say Bank A has a judgement on a property at 123 Main Street in the amount of $300,000. They have researched the property and feel the value to them in today's market is $140,000 and they will bid up to that amount. Any 3rd party can bid at the auction and if they want to bid $140,100 the bank will be happy to take their money and not proceed with the bidding.

The auction process needs to be fully understood by your brother or he may learn a hard lesson and part with some of his hard earned cash. Any party with lien rights can file a foreclosure motion and if you outbid them there may be senior liens that you will be responsible for it you want clear title to the property. It is imperative that you have a title company do a complete lien search so you know what outstanding obligations there are on that property and where the lien you are bidding on stands in that line-up.

That being said we have seen a surge in the success rate of 3rd party bidders and you might follow my blog where I update the latest information relating to the Palm Beach County Foreclosures auctions on a weekly basis. The first link below will take you the the entire blog and the second link will take you to my latest foreclosure update.



I hope this information is helpful but again please do your research as you do not want to be on the losing end in the auction process. If you or your brother have any questions please feel free to give me a call at your convenience.

Always at Your Service,

Tom Priester e-PRO
"Results Driven Real Estate"

Keller Williams Realty
561 308-0175
Web Reference:  http://www.tompriester.com
1 vote
May I ask, what happens to the second mortgage if a property is sold through auction by the first mortgage holder?
Flag Tue Jul 14, 2015
Craig Fialko…, Agent, Wellington, FL
Thu Mar 3, 2011
Jennifer is exactly correct and outlined the process perfectly. It may not sound like it makes sense, but the bank has to see if there is anyone out there willing to buy the property for what is owed. If you were the bank, taking a huge loss, would you allow a property that is valued at $200,000 sell at auction for $100,000? Not likely. You will want to get every possible amount you can to recoup your losses.

These auctions are a minefield, becuase some people also bid on homes where the HOA filed foreclosure. In those cases, people think they own a house becuase they purchased at auctions for something like $5,000... but not aware there is the original mortgage to satisfy as well.
1 vote
Hi, we're looking to bid on a foreclosure in the next few weeks - I hired a lawyer who did the lien search and other than the mortgage and two small judgments (plus the back HOA fees - we own property in the complex already so I was able to find out what was due), do we need to actually pay off the mortgage? I thought purchasing at auction meant the bank accepted the highest bid....it was the other liens we were worried about. Thanks so much!
Flag Fri Jun 21, 2013
Eli Givoni-S…, , Boca Raton, FL
Thu Mar 3, 2011
These are legal questions, as foreclosure is a legal process. So, unfortunately, I can't answer those questions. You need to call an attorney.

My question to you, though, is why would you let your property go to auction and put foreclosure on your credit? You can do a short sale and keep foreclosure off your credit. We are a professional short sale service and would be happy to explain the process to you. Please call us directly to discuss your specific situation. Our services are FREE to homeowners. We look forward to hearing from you.

Eli Givoni, Director
Short Sale Department, LLC

MARS Disclosure for General Commercial Communications
Short Sale Department, LLC is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit.
1 vote
Antoinettezo…, Renter, Jacksonville Beach, FL
Mon Mar 28, 2016
1) If a fl judge gives a final judgement to foreclose on your primary home can u still file a chap 13 bankruptcy immediately afterwards to stop the foreclosure?

2) Can SSD or Long Term Disability funds (lump sum or monthly) be taken to pay debts?

Background :
Take out a chase HELOC in 2004 offering a fixed rate. Bank added almost $50,000.00 in unaccountable funds to loan. Has misapplied payments. Refuses to show more than $5,000.00 in cancelled checks for loan (checks only way to purchase). Bank refused my payments several months ago unless I refi or loan mod their incorrect balances.
0 votes
Anabelmeo, Home Buyer, Atlanta, GA
Tue Aug 18, 2015
There are several online sources like Homepath.com and online auctions for foreclosures. The newspaper list them and sometimes homes are already listed with a realtor. Do a search for online auctions by your town and state and you should be able to find some. Many require that you submit through a realtor so contact your local realtor and ask them to help you out.
Reference: http://ForeclosureIQ.com
0 votes
Debra B Albe…, Agent, Port St Lucie, FL
Fri Mar 4, 2011
The property is becoming as asset for them. They are not going to let it be purchased for less than the amount they have determined they can get.

Banks no longer are in debt to the federal government for the bail out. They are paid up. The bank properties are not assets. They are protecting the value of their assets. They are doing this by not letting a house go at auction for less than it should...AND...they are selling at fair market value...AND...they are not flooding the market with bank owned properties that would drive down prices.

And, by the way, they are not putting up real money because they are the owners now. They are just protecting the value.

Hope this helps~

Debbie Albert, PA
Keller Williams of the Treasure Coast
Web Reference:  http://www.ronanddebbie.net
0 votes
Mott Marvin…, Agent, Sunny Isles Beach, FL
Fri Mar 4, 2011

If I understand the process, the reason that the lender bids- and usually they bid to protect their investment... they bid what is owed them, which may and usually is greater than it property's value. The situation may not seem right... but it is the lender, after all that took the risk.

http://goo.gl/JUl3W ≈✔≈ Like Us on Facebook ≈✔≈
0 votes
Jeanne Feeni…, Agent, Basking Ridge, NJ
Fri Mar 4, 2011
Part of the process - a bank rep is at the auction to buy the property in the event bids are too low and buys the property - it is then bank owned. The bank will hire a resource to assist with pricing and then list the home for sale. Your brother will have his chance then.

Alma's points are very good ones.

Good luck to you,
Jeanne Feenick
Unwavering Commitment to Service
Web Reference:  http://www.feenick.com
0 votes
Teddy Jagess…, , Wellington, FL
Thu Mar 3, 2011
The property has to be sold at a public auction administered by the clerk of court. When the final bid is lower than the bank will expect to sell it at a foreclosure minus closing expenses the bank will purchase the property and net more supposedly in a REO sale. There are cases where the bidding is high enough that the bank will let it go to a the highest bidder.

Bear in mind that your brother has to be careful and do his homework as once he wins a property the foreclosing bank will end the story therefor him, but there may be other liens and encumberances that may have to be negotiated and settled afterwards. Buying from a bank directly ensures a clean title http://www.sellmypbchomes.com
Web Reference:  http://mypbchomes.com
0 votes
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