Auction Process/FAQ's

Mortgagee’s Foreclosure Auctions:

A mortgagee’s foreclosure auction takes place when a borrower (mortgagee) is in default under the terms of the mortgage. The lender (typically a bank) gives the required statutory notice to the borrower and commences the foreclosure process. The culmination of the foreclosure process is the actual foreclosure auction when the lender sells all of its right, title, and interest in the property to the high bidder.

Typically the auctioneer handling the sale will run promotional advertisements in addition to the legal notices required by law. The advertisements will state a required deposit which any potential bidder must bring to the auction in the form of a bank treasurer’s, cashier’s or certified check payable to him/herself. The successful bidder must endorse the deposit check and sign a memorandum of sale (purchase & sale agreement).

At the auction the auctioneer will inspect the deposit checks of all qualified bidders and record their names addresses and phone numbers. The auctioneer will then read the notice entitled “Mortgagee’s sale of real estate” which sets forth the parties involved, when the mortgage was given, the legal description of the property, and the terms of the sale. After reading the notice the Auctioneer will read the Memorandum of Sale and then take questions from qualified bidders. After the question period the Auctioneer and Lawyer for the lender will make any additional announcements and then commence the bidding. The auctioneer will declare the property sold and the sale will be officially completed when the successful bidder has tendered the required deposit and signed the memorandum of Sale.
  

Frequently Asked Questions Regarding Foreclosure Auctions:

Who do I make the deposit check payable to? 

Yourself, if you are the high bidder you sign it over. If you are not the high bidder you just put it back in the bank.

Will I be responsible for anything in addition to what I bid?

Yes. At a foreclosure auction the high bidder is typically responsible for any liens having a priority over the mortgage being foreclosed. Most often this is just real estate taxes and water & sewer charges owed to the particular municipality where the property is located. We almost always have a Municipal Lien Certificate from the City or Town outlining what is due. This question, however, should be asked at every auction.

What if I can’t get financing? 

You lose your deposit. Unless you are a cash buyer you should be either pre-qualified for a loan or be very confident in your ability to obtain a loan. 

Will we get to see the inside of the property? 

Usually not. The bank does not have keys to their borrower’s property and does not have the right to go in if the property is occupied. The auction typically takes place in the front yard and the property is sold sight unseen. 

What if the property is in bad shape inside or it needs a new heating system? 

You are buying the property “as is and where is” and subject to all known and unknown defects. There are no guarantees and no inspection contingencies. 

What if the property is occupied and the people won’t leave? 

It is the high bidder’s responsibility to evict the occupants if necessary.

What if my bank can’t close within the thirty days that was called for in the Memorandum of Sale? 

Every situation is different and you should ask the question of the attorney handling the foreclosure for the lender.

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