Real estate auctions, which are more commonly called Sheriff’s Sales, are one area of the distressed property business that I do not presently work. But because it is such a big part of the distressed property business, I have included this section for your benefit. Please keep in mind that before you go out and start bidding at a Sheriff’s Sale, you must check title on the property. Just because a property is auctioned at a Sheriff’s Sale does not mean that the property is free of all liens and encumbrances. In other words, it takes significant preparatory work to determine the status of a property before you should even bid on it. This is one reason I shy away from Sheriff’s Sales. Another reason I do not work them is that they are very competitive. Consequently, in my opinion it is much safer and less competitive to purchase property in the pre-foreclosure period. But the choice is yours!

Real estate auctions are the end result of someone’s property undergoing foreclosure. For whatever reason, the property owner could not meet their mortgage obligations and the property was subsequently foreclosed by the lending institution. Put another way, the owner lost his rights to the property he pledged as security for the loan he used to purchase the property.

As for working these auctions, there are several things, other than the above warnings, you should know. The auctions themselves are usually held at or near your local courthouse, or in some other equally central and accessible location. An auction referee will initiate the bidding on each respective property with a minimum bid, the amount of which is determined by the bank holding the property. Bidding normally goes quite quickly, the whole process being completed for a property in as little as three minutes. The point is, you need to be prepared. Arrive at the auction early, having done your homework to determine which properties are worth your effort, and precisely what price you are willing to pay and not exceed.

You will likely have two types of competing bidders: people looking to purchase a home to live in, and pros who are looking to turn property into profit. Of these competitors, it will likely be only the pro you will have to concern yourself with. And when I say “concern yourself” I mean it, as these individuals are often grizzled in and skilled at real estate auctions, to the point that if they notice a newcomer bidding on properties in their area, they might go out of their way to bid you up to a price they know to be too high, just to hurt you and eliminate you as a future competitor on their turf. Additionally, you will need to be financially prepared to even make the bids. Not only will you have to come up with cash for the total purchase price within 30 days of winning a bid, but in most cases/states, will have to give 10% of the purchase price as a down payment immediately upon winning the bid! So unless you have extra cash on hand, working with a private investor who is willing to trust you with several thousand dollars of his cash may be the best way to meet these unique financial requirements.