You're describing a short sale.
The homes you're looking at are going to be auctioned. Foreclosure is extremely state-specific as well as county-specific and sometimes city-specific, and you need to study the process carefully before you wade in and bid. This is NOT an attempt to dissuade you from doing so -- bidding at the local sheriff sale on foreclosures is a major part of our business model. But you have to learn about the process in your state and county. This can take a long time.
With that in mind, this is what we do here in Allegheny County, PA with a mortgage foreclosure we're interested in. We track the foreclosure in the county's online court records system. We read the case thoroughly. We look at the property's deed and any outstanding mortgages through the online property records system of the county. We do research on the current owner, and we research the title. Learning how to do all of these things took a great deal of time and effort.
On the day of the sale, we go to the lawyer representing the mortgage foreclosure entity and we learn what they're willing to sell it for, what their bid instructions are from the people foreclosing on the home. If their maximum bid instruction is acceptable to us, we tell the lawyer, as a courtesy, if we plan to bid higher than their bid instructions, and we immediately bid a dollar higher than their minimal bid limit when the sale comes up and the lawyer representing the foreclosure entity bids the minimum amount to start the sale.
As another courtesy, I also talk to other regular investors at the sale whom I have done business with or whom I have another business relationship. I inform them that I want the property. The wholesalers who are willing to bid on the property know that I am not a wholesaler and can therefore afford to outbid them on the property and still make money on the deal. For most of them, the maximum bid instruction is too much anyway. They know me and I know them, and we both know that this is not the last sale we'll be attending together. Sometimes we horse trade -- I won't bid against you for that property, you won't bid against me for this one. Sometimes we just trade information: "That title isn't clear, I saw bad cracking on the back wall of the foundation of that place, FYI, that one was just postponed." That sort of thing.
If all goes well, I bid the minimum bid plus one, and the officiating sergeant ends the sale. If not, I will bid against whoever bids until I hit the maximum amount I am willing to pay for the property. In most cases, I will have had at least a month to come to that number. If I am bidding against obvious amateurs with their hearts on their sleeves at the auction and I sense that they are willing to go significantly higher, I have no qualms about bidding them up a bit as a bar to entry into the group of experienced auction buyers of the county who get things done in a civilized way and don't waste each other's time and energy when acquiring properties. The 100+ seats of the Gold Room at the Allegheny County auction are overfilled each first Monday of the month with rubberneckers who will never successfully acquire a worthwhile property at a decent price in that room. They just don't know it yet.
There are at least six regular wholesalers and ten more people like me at every monthly sheriff's sale in this county. I can't imagine St. Louis is much different from Pittsburgh. I do not know the foreclosure laws in Missouri and St. Louis. I do not know if you are looking at mortgage foreclosures or tax foreclosures. I hope I have convinced you to investigate the laws in St. Louis thoroughly and not think of the auction as a one-off place to buy properties. You can get a great deal, you can get lucky, but the people who repeatedly succeed at the auction are not quite normal. Most of them have formal research and investigative backgrounds, in addition to being bright, organized, knowledgeable, hardworking, highly competent, good at taking calculated risks, and, of course, quite wealthy.
