How to Buy a House at Auction With a Mortgage

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Purchasing a house at auction might be a fantastic way to get a deal on a house. Buyers and investors might benefit from the prospects presented by the numerous auctions that take place as a result of foreclosure or other financial issues. For individuals unfamiliar with the business, discovering auction listings and understanding the bidding and purchasing process might be difficult. Before placing a bid, it’s crucial to perform some research and comprehend the auction’s requirements. A successful and satisfying experience can be had when you buy a house at auction with careful planning.

How do Property Auctions Work?

For buyers and speculators, purchasing a distressed home at a real estate auction can be a thrilling opportunity. But it’s crucial to plan ahead and steer clear of typical blunders. In order to participate in real estate auctions, either physically or online, you must provide a 5% to 10% deposit.

Buyers might also be required to provide cashier’s checks or a letter of mortgage pre-approval. There are many types of auctions for non-distressed REOs, short sales, and foreclosures. The auction process involves bidding against competitors until a single bidder remains, at which point the auctioneer awards the property to the winning bidder. The winner is usually required to pay for the property at the close or leave a deposit with the auction house and complete the purchase within 30 to 45 days.

Types of Auctions:

Property auctions come in three types, each with its own set of rules and conditions.

  1. Absolute Auction:

An absolute auction allows the highest bidder to win the property, regardless of the final price. These auctions can occur in-person or online, and there is no minimum bid amount. However, absolute auctions tend to be highly competitive and heavily attended. Sellers who are looking for a quick sale and are willing to take a risk on selling the property for less than its value often hold absolute auctions. Banks may also hold absolute auctions for foreclosed properties on their books, while homeowners in financial distress may also opt for this type of auction. All-cash buyers and short-term investors are typically interested in absolute auctions.

  1. Minimum Bid Auction:

A minimum bid auction involves the property seller setting a minimum bid, and the property won’t be sold for less than that amount. If the minimum bid is less than what you are willing to pay for the property, it may not be worth attending this type of auction. Banks may conduct a minimum bid auction if they don’t need to sell a foreclosure quickly and want to recover a specific percentage of a delinquent loan.

  1. Reserve Auction:

A reserve auction allows the seller to accept or reject the winning offer, meaning that even if you have the highest bid, you may not necessarily secure the property. Reserve auctions are more popular with less motivated sellers who want to avoid accepting less than a minimum amount.

How to Buy a House at Auction With a Mortgage?

property auction can be a great way to buy a home below market value, but it is also a risky endevour. Before you proceed, it’s important to weigh the risks and benefits. Keep in mind that you won’t be able to have the property professionally inspected, financed funds are not always accepted, and you’ll have to conduct the necessary due diligence, including investigating title issues and outstanding licenses. You’ll also need to pay for all back taxes in many jurisdictions and any unpaid Homeowner Association (HOA) fees.

Additionally, your lender may not release funds until you complete repairs, so you’ll need a bridge loan or hard money loan. To find auction opportunities, you can check local newspapers, online auctioneer sites, public places like a county courthouse, or even sign up for mailing lists of auction houses. You’ll need to assemble an expert team that includes an experienced real estate agent or appraiser and a real estate solicitor. Be prepared to bid with cash, as you won’t be able to finance the purchase with a mortgage.

You’ll need to pre-qualify and demonstrate that you have the means to pay. If you have the winning bid, you’ll have to complete the paperwork and pay for the property either immediately or within 24 hours. Depending on the circumstances, you may or may not be provided access to the home on the same day.

Finally, keep in mind that if you buy a house at auction that was later redeemed by the homeowner before the end of the cancellation period, you will be refunded your full purchase price.

Pros and Cons of Buying at an Auction

Below are some of the pros and cons of buying at an auction to consider:


  • Quicker process and potentially fewer costs involved, such as estate agent fees.
  • Opportunity to find unique or undervalued properties that may have been overlooked by other buyers.
  • The exciting and fast-paced atmosphere of the auction.


  • As soon as the hammer goes down, the sale is final, so buyers must be prepared to move quickly and pay the deposit.
  • The deposit required is usually 10% and the remaining 90% must be paid soon after the auction.
  • There is a risk of wasting time and money on a property inspection if the bid is not successful.


Buying a house at auction with a mortgage requires careful planning and strategy, as well as assembling an expert team that includes an experienced real estate agent or appraiser and a real estate attorney. It’s important to conduct the necessary due diligence, investigate title issues and outstanding liens, and pay for all back taxes and any unpaid Homeowner Association (HOA) fees. Additionally, buyers must be prepared to move quickly and pay the deposit, as the sale is final as soon as the hammer goes down.

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