Buying at Real Estate Auctions
Real estate auctions offer some of the deepest discounts available in property investing. Foreclosure auctions, tax sales, estate auctions, and bank-owned property sales all use the auction format to move inventory quickly. For investors who understand the process and do their homework beforehand, auctions provide access to properties at 20-50% below market value. The tradeoff is speed, limited inspection, and cash-only requirements that keep most buyers away.
Types of real estate auctions
Foreclosure auctions (trustee sales)
When a homeowner defaults on their mortgage, the lender can sell the property at public auction to recover the loan balance. In non-judicial foreclosure states, this happens at a trustee sale on the courthouse steps or online. Bidding starts at the outstanding loan balance plus fees. If nobody bids above that amount, the lender takes the property back as REO. These auctions happen on set schedules (first Tuesday of the month in Texas, for example).
Tax deed auctions
Properties with delinquent taxes are sold by the county. See our tax deed investing guide for details. Opening bids start at the delinquent tax amount, which can be a fraction of the property's value.
Estate and probate auctions
When an estate must liquidate property, a court-supervised auction may be required. These auctions often attract fewer investors because they are less publicized than foreclosure and tax sales.
Online auction platforms
Auction.com, Hubzu, Xome, and other platforms host online auctions for bank-owned properties, government-owned properties, and private sellers. These platforms have expanded access to auctions nationally, but they have also increased competition and driven prices closer to market value.
Preparing for an auction
Research the property
Auction properties cannot typically be inspected inside before the sale. Your due diligence is limited to:
- Drive-by exterior inspection
- Comp analysis for ARV
- Property data for ownership, tax, and mortgage information
- Title search for liens and encumbrances
- Neighborhood analysis for market trends
Set your maximum bid
Before the auction, calculate your maximum allowable offer using the standard formula: ARV × 70% - estimated repairs - your profit margin. This is your walk-away number. Auction energy can push you to bid higher than rational. Having a predetermined maximum prevents emotional overpaying.
Arrange funding
Most auctions require cash or cashier's check payment within 24-48 hours of winning. Some require a deposit at the time of bidding (typically $5,000-$10,000). Have your funds ready before the auction. Traditional mortgage financing is not available for auction purchases. Options include cash, hard money loans, or private money.
Bidding strategies
- Bid with data, not emotion: Your analysis determines your maximum bid. Do not exceed it regardless of what other bidders do.
- Start low: Auction bidding works in your favor when you start low and force other bidders to show their limits.
- Watch for overbidding signals: When bidding slows down and increments get smaller, you are approaching the winning bid. If you are already at your maximum, let it go.
- Track auction patterns: Attend several auctions as an observer before bidding. Learn the rhythm, the regular bidders, and the typical price ranges for your market.
- Focus on less popular properties: Properties in less desirable locations, with smaller footprints, or needing heavy rehab attract fewer bidders and offer better margins.
After you win
Winning the auction is just the beginning. Post-auction steps include:
- Pay the balance: Complete payment per auction terms (typically within 24-48 hours)
- Record the deed: File the trustee's deed, tax deed, or auction deed with the county recorder
- Address occupancy: If the property is occupied, you may need to serve an eviction notice and go through the legal eviction process
- Quiet title (for tax deeds): File a quiet title action to clear any title defects
- Inspect and assess: Now that you own the property, conduct a thorough interior inspection and finalize your rehab plan
- Insure the property: Obtain property insurance immediately. Most policies can be backdated to the auction date.
Risks of auction buying
- No inspection: You are buying the property as-is, sight unseen inside. Hidden damage (mold, foundation issues, fire damage) can turn a good deal into a money pit.
- Title issues: Auction deeds may not clear all liens. IRS liens, HOA super liens, and senior mortgages may survive. Budget for title clearing costs.
- Occupant eviction: Former owners, tenants, or squatters may be living in the property. Eviction timelines range from 2 weeks to 6 months depending on the state and circumstances.
- No financing contingency: If your funding falls through, you lose your deposit and may face legal consequences.
- Competition: Popular auctions attract experienced investors, hedge funds, and institutional buyers who can outbid individual investors.
Auctions and wholesaling
While you generally cannot assign auction purchases, you can wholesale properties acquired at auction through a double close or by marketing the property immediately after acquiring title. Some wholesalers attend auctions specifically to buy properties they can double close with buyers they have already identified. The key is having your buyer lined up before the auction so you can sell the same day or within days of acquiring the property.
Related articles
- Courthouse Steps: Auction Buying Guide
- Tax Deed Investing: How It Works
- Wholesaling Bank-Owned REO Properties
- Proof of Funds: What Buyers Need