Foreclosure auctions

[Mark Forest]

I don’t understand the foreclosure auctions. I have heard the company who holds the mortgage will bid on the property. What does this mean? They hold the note and use the house as security so I do not get how or why they have to “bid†on the house.

I have also been told that if the person foreclosed upon had no equity in the home no one will bid on the house. What does the prior persons amount of equity have to do with it? I thought at auction it just means a bunch of people bidding on a hose they want.

I am sure this is one of those things that is just so simple I am missing it. Thanks in advance to all who answer.

[Jon Holdman]

I'll try to answer the OP's question.

Steve, there are two kinds of auctions. One, like eBay, is where an auctioneer is selling a house (or whatever) for someone else. People bid, and as long as the highest bid is high enough, the buyer gets the item and the seller gets the cash, less the auction fees.

With a trustee sale, the lender is foreclosing on the property. The do not yet own it. The foreclosing lender will make some bid based on the amount they're owed. If anybody else bids, the auction will proceed as above, except that most or all of the sales proceeds will go to cover what the foreclosing lender is owed. If there is anything more, the previous owner gets it. In either case, the previous owner is out. If nobody outbids the lender, they get the property. If someone else bids, they end up with the property, and the lender gets paid what they were owed.