How do auctions work?

[Robert Mungillo Jr]

How does an auction work? Is it the same as a forclosure? Can you finance a house that is on auction?

[Jonathan Towell]

I'm guessing you are referring to county foreclosure auctions. I'd recommend the book "The Pre-Foreclosure Property Investor's Kit."

Basically, it works like this...

People buy houses using mortgages from lenders like banks. When a person quits paying the mortgage, the lender goes through the foreclosure process to take the house back from the borrower. Once a month, the lender representatives meet investors at the county courthouse to auction off the properties. 

I imagine the rules differ from state to state or county to county. Usually, investors need to provide proof of cash or certified funds before they are permitted to bid. Because proof of funds is required, you can't "finance" a house in the traditional sense. In other words, you can't win a property at auction and get 60 days for a lender to provide funds. 

But, the word "financing" just means the act of allocating capital to acquire an asset. So, you can "finance" houses at auction by bringing cash. Or you can finance them by securing a line of credit before hand, withdrawing funds from the line of credit on the day of auction.

I hope that helps.