Many people have questions regarding the foreclosure process and auctions. What happens if the home does go to a foreclosure to be sold at auction? It’s important to understand this stage of the process because it will determine how long you have before you need to remove all your belongings. We’re going to sort through some of these variables and get a better understanding of what takes place under these difficult circumstances.
Foreclosure auctions are the last step in the process. There may have been discussions about loan modifications, short sales or even pre-foreclosures, but the auction is typically the end of the line. At this stage, your options have been pretty well exhausted. The time it will take to put the house to an auction will depend on how backlogged the Foreclosure department is at the bank and whether the Foreclosure was judicial or non-judicial. Another variable that might reflect the time frame is how hard hit the entire area is. If there are multiple homes affected in a given location, the process might take a little bit longer.
The purpose of a foreclosure auction is to mitigate the losses a lender experiences when the borrower defaults on the payments. The goal is to recoup the difference that was owing on the property and also, cover the costs the lender incurred through the foreclosure process. If it’s a Judicial proceeding, the court will be involved, and they will oversee the sale and the auction of the home. If the auctioning of the houses successful, the courts will prioritize the payments providing to the mortgage lender first, then other liens that may be involved.
If the bank feels the house will sell quickly, they will likely act soon. In situations where the bank believes the house will sell fast, they will initiate the eviction process right away. This process can take between 60 and 120 days. Finding alternative housing should be a high priority at this point. The reason for this is if an eviction notice comes down, it can especially impact your credit rating. Some people have even gone to extremes such as to dispute the eviction notice with hopes to buy themselves time. Prolonging the process is never a good idea. Once the Sheriff’s Department receives the eviction notice, they will come by removing you from the property.
Houses that are going up for auction are usually listed downtown in a government office building in each County. You can also find homes listed online searching for trustee’s sales because it’s the trustee that’s making the property available for auction. Some areas will have the auctions happen rate on the city hall steps. This gathering can happen on a daily basis.
The auctioneer usually addresses the crowd first by reading off the list of cancellations. They will remove the home from the list if there’s been a resolution made. For example, a modification or a short sale. Once they have finished reading off the list, they get down to the auction itself. Oftentimes the crowds can start the gather as people are curious and also look to find a good deal.
It is not unheard of to have a home go for auction with a reserve. The bidding would have to meet a specific minimum number before the house would be released or classified sold to the purchaser. The rules for this type of sale are different than a traditional real estate transaction. If the house is put up for auction, the purchaser is not allowed to go through it to judge its condition. The bidder is purchasing the home as is and sometimes sight unseen. Also, any person participating in the auction will be vetted first to see if they have the funds to complete the transaction.
In conclusion, the auction process is efficient for lenders attempting to recoup their loss. However, it’s a tremendous emotional hardship for the people losing their home. It can be quite devastating to some families. Knowing this information hopefully can help someone facing the situation make appropriate plans to avoid it.