Auction Question

[Stephanie Polydoroff]

Hi there,

Attended my first auction today to watch and it was an interesting experience! I was pleased to see there are still deals to be found in hot markets like Phoenix. Though..I left with several questions.

On the auction list it has the estimated starting bid and then they have the total debt estimate. Houses went for cheaper than the total debt estimate.

When you purchase a house at the auction will you be paying for anything past the winning bid amount? What does the total estimated debt mean? If there is a loan outstanding greater than your winning bid will you be responsible for it? 

Feel free to offer more advice than just the questions I asked.

Thanks for the input :)  

[Michael Miele]

In my experience, most of the time the first mortgage is foreclosing on the property. A lot of times the owner has taking out second and sometimes third mortgages on the property. Usually the first mortgage wants to get paid what they're owed which means the second and third mortgage gets nothing. For example. the total debt amount might be $300K. First mortgage $200K, Second $100K. Therefor the property could sell at auction for $200K. The First mortgage usually has priority over other mortgagees so once sold at public auction, all other liens are wiped out. This doesn't include town, city, or county tax liens. Those usually have priority over all mortgagees. 

In my area the certain auctioneers charge a fee which is typically 3%-5% of the purchase price. If thats the case it would be posted or disclosed prior to bidding.  

Hope this helps