Turn to an Auction Before Foreclosure

October 7th, 2007 by PA - Bloger

img_0657.JPGSome sellers these days that are behind on their mortgage or in the foreclosure process have very few options when it comes to dealing with their lender. Turning to an auction company before a foreclosure occurs might be the answer.

We are seeing a lot of “pre-foreclosure auctions” out there. This means that the auctioneer has contracted with the debtor to sell the property at a reserve price in one of the following methods:
1) above the mortgage amount owed
2) below the amount owed but with the seller making up the difference at closing
3) at any amount on paper and then going to the lender and negotiating a short sale.
In scenario 1 every one is happy. In scenario 2, everyone may be happy however the seller will have to come to the closing with a check, most people don’t like to do that or simply cannot. If the seller has nothing to lose, such as their credit, they would rather skip this scenario and just throw the keys back to the lender.

Scenario 3 is one that is becoming very popular in today’s market. The auctioneer will bring the executed contract to the bank and figure out if they can get the bank to take less than what they are owed based on what was obtained at the auction. The important item to note is that most banks will not negotiate unless you have a contract in hand and that’s what the pre-foreclosure auction procures. The sale, of course, is subject to the lender’s approval and this might take a while so buyers are encouraged to hang in there while the auctioneer does the work to get everything resolved. This may be a long process that includes at least one or more appraisals, broker price opinions, and a thorough evaluation of the debtor’s particular situation. Most auction companies have already gone through this process with the lender so many of the items required for a short sale are most likely checked off.

Since the auction process, if executed correctly, achieves the highest price in the shortest period of time through competitive bidding, the pre-foreclosure auction is an excellent option for any debtor that meets the criteria.

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4 Responses

  1. Julie Watts says:

    Interestiingly the number of Property Auctions held in the UK every year has increased dramatically.
    This year some 40,000 will be offered. There are currently just ove 400 active auction houses in the UK who wetween them this year at over 1602 auctions will offer property worth in excess of £7. billion pounds.

  2. I have been thinking on getting in an auction. I hope you’ll post basic tips here.

  3. Wesly says:

    The tips discussed above are really helpful as many people are worried that they will not get any profits if they go for foreclosure .It completely depends on the option we take.

  4. Well, the most common thing that happens is that people fail to communicate they are even in trouble with their payments. You’ll find lenders quite accomodating nowadays. Dale

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