How do home auctions work? What do you need in order to buy a house at an auction?

Asked by Tmillercsr, Garden Grove, CA Thu Aug 6, 2009

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Steven Ornel…, Agent, Fremont, CA
Sat Aug 8, 2009
Hi Tmillercsr,

Auctions are a different animal all together and the “sellers” do not want any possibility of a house they just sold does not close escrow due to any last minute lender issues. There are really two types of Auctions.

Type 1: Trustee Sale - If you are looking for actual Trustee’s Sale auctions, they are published in the newspaper on a weekly basis under “public notices.” Notices are also typically posted at the entrance of the County courthouse. "Loans" need not apply: California state law requires liquid funds when your bid is accepted. The Trustee accepts cash or cashier’s checks (and nothing else). Most who do this on an ongoing basis will go to the auction with several denominations of cashier’s checks up to the amount they are willing to pay for the property of interest. Any set cashier's check overage will be returned to you. Condition of the property is a major concern.

Type 2: Auction Company – Each auction company will have their individual process posted on their website to tell you about deposit requirements and how to view the homes. You have to have a cashiers check for deposit at a public auction. Seasoned bidders will have multiple cashiers checks of different denominations to make up a particular bid of a home. These auctions allow the bank(s) to unload lots of properties faster in this "bid-up" environment. It's really more of a pressure sales environment based on the premise that pitting buyers against each other results in higher selling prices for the sellers. I'd stay clear of these sales-oriented auction properties. Have a drop-dead figure for each property you bid on and once you reach it “walk away.” Although you do get some time to do inspections, this is really a process for someone who can walk into a house and know what it will cost to place it back into shape. You can pay to have inspections done, but this might cause you to bid up the price of the home during auction time so you don't waste your money paid for the inspections. Really, there's no reason to be in an environment whose sole purpose is bidding-up a property's price in these times.

Best, Steve
3 votes
Dave Osborne, Agent, Orange, CA
Thu Aug 6, 2009
At a Trustees Sale you need to show up at the county with enough "money" to cover the purchase price. Financing is not allowed. Most people bring Cashier's Checks made out to themselves in $10,000 increments then endorse the correct amount over to the county.

If you are talking about private auctions like REDC, you may be able to get financing but you must bring a willingness to pay a Buyer's Premium on top of closing costs. This Premium is usually 5%-10% of the purchase price depending on the auction house. You also need to bring a good faith deposit.

If you would like a copy of my booklet, "How Smart Investors Buy Homes In Today's Market", drop me a line at and I will be happy to send you a free copy.
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2 votes
Emily Knell, Agent, Huntington Beach, CA
Thu Aug 6, 2009
You need cash and you need to investigate each property, you also have to be willing to take a risk that the property doesn't have any liens on it. The investors who buy at the courthouse or wherever they're scheduled at (public libraries etc) have massive amounts of cash & are willing to take the risk that there could be some outstanding lien, including IRS & otherwise. Sometimes they end up with a property with a $50k+ lien on it, but it doesn't matter so much to them because they've got $30M to work with.

Do you need to Short Sale your home that you're upside down on or were you able to successfully get a loan modification done?
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