"Sold to the highest bidder!" Buying a home through an auction can mean incredible deals. In most cases, the seller is either the government, which has taken possession of the property due to unpaid taxes, or the lender, when the former owner stopped paying the mortgage. Despite the sad circumstances, competition for homes can be keen.
Get preapproved for a mortgage. Have your financial package ready to go before the bidding begins.
Look in the newspaper classifieds or under "Home Auctions" in the Yellow Pages and on Internet search engines. Call nearby real estate agents to see if they're aware of any scheduled auctions. Add your name to mailing lists from local auction houses to be alerted to upcoming opportunities.
Get a list of the properties up for auction. Get as much information as possible beforehand from the auctioneer to get a feel for which properties may interest you.
Visit the properties on the block. Auctioneers generally have a preview date during which tours of the house will be given, although this isn't guaranteed.
Have any home in which you're interested inspected by a professional inspector. This can cost several hundred dollars but will identify any significant problems that affect the value of the home, such as pest damage, faulty foundations or leaks. You may get approval to have the home inspected as a contingency, but bear in mind that contingencies of any kind reduce the probability of the bid being accepted at the lowest price. Other auctioneers only sell properties as-is.
Decide how high you're willing to go. Mentally setting your maximum bid can stop you from spending more money than might be reasonable for a property, or losing a deposit.
Realize that buying at auction involves some risks. In some cases, you can't withdraw a winning bid, even if you're not able to secure financing later. Penalties for backing out of a winning bid can be steep, often as high as 25 percent of the bid amount or whatever the bid deposit may have been.
Finalize your mortgage if yours is the winning bid. Contact your lender as soon as possible after the auction to wrap up your financing and paperwork.
Close escrow. Typically, you will have two weeks to 30 days to do this.
Some auctioneers, at the home owner's request, will set a reserve price that guarantees a minimum price will be received. This means that even if you're the winning bidder, you may not get the house if your highest bid isn't over the reserve price, which should be disclosed in advance of sale. Auctioneers may add a buyer's premium of 5 to 10 percent of the winning bid as their cut. Be sure and take this into account when you're calculating the maximum price you're willing to pay. Confirm who pays the auctioneer's fee. Check with the auction company to make sure the property has a free and clear title. You don't want to buy something only to learn after the fact that you may be liable for unpaid taxes or other bills attached to the property.
If you're buying a property as an investment, rather than a residence, the mortgage approval process may require a much larger chunk of change up front.