Last Chance: The Auction

Most borrowers will exhaust all of their alternatives to foreclosure before a bank foreclosure auction becomes necessary.  A bank foreclosure auction is the last time that a homeowner will have to save their home before they lose ownership of the property to the highest bidder.

The beauty of the bank foreclosure auction  is that any person may make a bid, even the financially distressed homeowner.  For the homeowner who is determined enough, buying back their home at auction can be a viable method of saving the home. 

Depending on the actions of the homeowner, a foreclosure auction may take several months to be scheduled.  Since the financial problems of many people might be solved within that time period, it is not entirely out of the question that the original homeowner would have enough money or credit to secure a loan for the purpose of bidding on their own home. 

When a person makes a winning bid on their own home at a bank foreclosure auction, the new price of the loan would replace the old price.  For example, if a person’s property goes to auction because a loan of $100,000 was defaulted on, and the homeowner still owed $75,000, but was able to place a winning bid at $50,000, the homeowner would only be responsible for the $50,000, not the remainder of the original $100,000 loan.  This is because banks take homes to auction in order to recoup as much of their losses as quickly as possible, so they accept the risk that they may not get full value for the home.  Since banks have to pay the maintenance fees of any vacant homes that they own but are unable to sell, it is in the best interest of the banks to take a financial hit with one home so that they may free up their resources to write more loans. 

The problem with waiting until the bank foreclosure auction to save a home is that a homeowner has no guarantee that they will make the winning bid.  Many bidders will come from all over a state just for their chance to bid on a property for less than the appraised value.  Many of these bidders are determined enough that and have pockets deep enough that can afford to outbid any other person present at the auction. 

As a word of advice, homeowners shouldn’t get their hopes up about a bank foreclosure auction.  The possibility that a person will be able to place the winning bid for their own home is small, but not non-existent.  One has to wonder that if a person has the resources to make a winning bid, why couldn’t they have just made good on their defaulted debts before the auction?  Each person’s situation is different.  A homeowner may be able to scrape together enough money at the last minute to make a winning bid, but this does not mean that a homeowner should depend entirely on their ability to cast a winning bid in order to save their home.  For the determined homeowner, attending the bank foreclosure auction of their own home shouldn’t be the only strategy to save a home that is explored.  This would be the equivalent of playing the lottery as a way to earn money to send the kids to college.  Will it work?  Maybe.  Is it likely to work?  No.