A real estate auction is a public sale of a residential property that gives individuals, real estate investors and professionals the opportunity to acquire a home for a discounted price. A house may be auctioned if it has been foreclosed on, repossessed by a bank, or if the property has been reclaimed by the government and needs to be sold to recoup money that is owed.
Types of Auctions
There are four main types of property auctions
Absolute auction: The highest bidder wins the property
Minimum-bid auction: The bidding begins at a specified price
Foreclosure auction: The lender cannot profit from the auction, so these properties typically sell at less than market value
Reserve auction: The lender can reject the highest offer if the reserve price is not met
How Property Auctions Work
Auctions take place at a variety of locations, including local courthouses, hotel conference rooms and online.
The starting price of the auction may be the balance remaining on the mortgage, or may be a lower amount to spur bidding. Often, these properties are sold at a loss, but if there is a profit, it often will be returned to the homeowner after the mortgage and any other liens are paid.
Bidders will need to bring a cashier’s check and a personal check to the auction for the amount of money required by the auction holder. For Kennedy Wilson auctions, this is listed on the auction page for that particular property. Winning bidders will pay auction feeds and/or bidding fees and put down an earnest money deposit on the property before they leave the auction site. The winner then goes through escrow and closing, as with a typical home purchase.