On the whole, I say a big old waste of time.

But let’s be clear on what kind of auctions we are talking about.

1.  Trustee Sale Auctions (Foreclosure Auctions)

These are the auctions sold at the court house steps.  This is the third step (behind notice of default and notice of sale) of the foreclosure process in CA, where bidders can show up and purchase the lien position (specific rights) to the property.  From my experience, there is a lot of opportunity at these type of auctions.  But, with opportunity comes risks as well. These sales are cash only, and you take the property as-is, subject to any senior liens (property taxes, federal judgments, first TD loans), and there is no inspection period.

Getting a good deal on these type of sales take a time, energy, and knowledge, but it is done all the time by investors with cash.

2.  Bank Owned Auctions (Post Foreclosure Auctions)

These are the auctions you may see advertised on TV, newspapers, & magazines that advertise a mass auction at a large venue like a convention center.  Check out Auction.com run by REDC to see what I mean.

What’s important to understand about these type of auctions is that these homes are already bank owned homes that have not sold. They’ve gone through the trustee sale auction process above and no one bought them there, so they reverted back to the bank.  Additionally, they have been on the market 1-6 months as bank owned and still have not sold.  There must be something wrong with these, right?

Typically, they have not sold because they are overpriced. So, the banks put these properties in the bulk auctions process to try and get them moved.

Buyers may be lured into this “auction” mentality in the hopes that they can buy something for .50c on the dollar.  And that is just not true.

At these type of auctions, the banks put a reserve price on the properties.  If this price is not reached, the property will not sell.  For example, on a $300,000 property listing, they may put a low opening bid of $5000.00 to draw attention to it, but they have not intention of selling it for anything less than $280,000 range.  That is the reality.  If you think you are going to get it for $100,000 or so, don’t waste your time.

I personally have 4 listings that are coming up in a auction like this.  2 of them have had good offers (within 10-15%) on them over the past 2-3 months that the bank did not take.  So, if the bank did not take those offers, why are they going to a huge hit on the price at the auction?  Don’t be tricked.

Can you buy a decent property at these auctions?  Yes.  Are you going to be getting are great deal or steal?  For the reasons given above, I’d say no.

3.  Private Party Auctions

Similar to the bank owned auctions listed at #2, these are companies that try to sell individual homes for traditional sellers.  And like above, they set a ridiculously low opening bid price to draw people in with no intention of accepting a price near that range.

The important thing to find out these last two type of auctions is whether there is a reserve or not.  If there is a reserve, I would not waste my time on them.

If you are truly looking to find a steal, you need to focus on trustee sales in my opinion.