A property is foreclosed and sold at public auction when the owner breaches the conditions of the mortgage. A town or city can foreclose for failure to pay taxes. A Condo Association can foreclose for failure to pay condo fees.
Why are foreclosure auctions sometimes postponed or canceled?
Auctions are sometimes postponed or canceled when the owner comes to an agreement with the mortgagee or files for bankruptcy protection.
Where will the auctions take place?
Auctions take place on the site of the premises being auctioned, usually at the street frontage. Condos take place at the common entrance door.
Can I purchase a property prior to a foreclosure auction?
The mortgagee (bank) does not own the property but holds the mortgage. You need to communicate with the owner to negotiate a sale prior to the foreclosure auction.
What else will I be responsible for?
In addition to the bid amount, the buyer will be responsible for any liens superior to the mortgage being foreclosed; municipal liens, prior mortgages, condo fees (if applicable), etc. The buyer will also be responsible for all recording fees and documentary tax stamps to be paid a the registry of deeds.
Why purchase property at auction?
Auctions represent a level playing field for all participants. However, properties are sold “as is” without benefit of financing contingencies or home inspections.
What should I do to prepare for an auction?
Prequalify Yourself: There is never a mortgage contingency with a property being sold at public auction. You need to know what you can afford before you bid. Talk with your bank or mortgage company and become prequalified. If you are the successful bidder and cannot close within the number of days specified under TERMS, you may lose your deposit.
Research the Property: Find out as much as you can about the property. The mortgage reference will be on our web site page for the property. Most Registries of Deeds are available online (see the link on our auction home page). Remember: the successful bidder at an auction is responsible for payment of all outstanding municipal liens.
Attend an Auction: Check the local papers for auctions in your area. Attend and observe one or two auctions to familiarize yourself with the process. Bidding goes quickly and you need to feel comfortable with the format.[/expand]
What do I need in order to participate?
- Arrive 15-30 minutes prior to the auction’s scheduled start time.
- Have the required deposit in the form of cash, bank check or certified funds (see the TERMS section of the advertisement). Checks should be made payable to the Bidder.
- Register with the auctioneer upon arrival. You will be asked for your full proper name, address, telephone number and proof of deposit.
Only registered bidders may ask questions at the auction.
Will there be access to the property?
Owners are still in possession of the property up to the time of auction and access is most often denied. There will usually be access to property which is vacant.
How does the bidding work?
Bidding is verbal and, in general, anyone can begin the bidding at any amount. If no one bids, the auctioneer or mortgagee will open the bid. In the case of a “MINIMUM BID AUCTION”, the bidding opens at the amount specified in the advertisement. There will be a representative bidding on behalf of the mortgagee.
What happens if I am the successful bidder?
The highest bidder will be required to sign a Memorandum of Sale which obligates them under the terms and conditions of the contract; and endorse their check over to the bank’s representative. The highest bidder will also be responsible for all outstanding municipal liens (taxes, water, sewer and interest charges) which will be disclosed prior to bidding.
What if the tenant has a lease or doesn’t move out?
Most leases do not survive the foreclosure. It is the successful bidders responsibility to evict any occupants.
Auction Terms
Mortgagor: the borrower
Mortgagee: the lender
Absolute Auction: property will be sold regardless of bid amount
Minimum Bid: the bidding will begin at this amount
No Reserve: the mortgagee does not reserve the right to bid on the property
No Minimum: there is no minimum bid on the property
Municipal Liens: money owed by the mortgagor to the town/city (taxes, water, sewer, etc.)
Qualified Bidder: bidder holding required deposit
What is the process?
- Mortgagee’s foreclosures are public auctions and are usually held in front of the property.
- The auctioneer will qualify and register the bidders.
- Registered bidders will be allowed to preview the property if there is access.
- The auctioneer will read the Memorandum of Sale and Additional Terms.
- There will be a question and answer period.
- Bidding will take place.
- Highest bidder completes the paperwork.
What is owed on the mortgage?
This information is not always accessible, however, you can research the mortgage at the Registry of Deeds for the original principal amount. Remember, if it is a second mortgage being foreclosed, the successful bidder will be responsible for paying off the first mortgage as well. The amount of the first mortgage is usually disclosed at the time of the auction.