How can an investor bid on their own foreclosure property?

[Gordon F.]

Let's say the worst case scenario has happened, and now you're at the auction for the property you had to foreclose on. How can an investor afford to open the bidding at the price of the UPB and costs? If you win, don't you need to be able to pony up that cash to buy the property, and wouldn't this be significantly increasing what you have into that property? I guess I'm not understanding why you'd pour more money into the house and shrink your P&L.

As an example, you hold a $100,000 note, and a few years later, the person defaults with an $80,000 unpaid balance (UPB). If you end up in foreclosure and you open the bidding by making a bid for $80,000, don't you then have to cough up that $80k in cash to get the property? And now you're $160,000 into a $100,000 note ($80,000 upb that was defaulted on plus the $80,000 cash you just bid for the property at foreclosure)? And what if you don't have that sort of cash to be able to buy back the property on any note you foreclose on?

Can someone explain this to me like I’m five years old, because I’m clearly missing something here?