How to buy a house at auction

Key takeaways

• Buying a home at auction can offer discounts — but comes with significant risk. Auction properties are sold as is, often without interior inspections, traditional financing or title protections, and buyers may inherit liens, unpaid taxes or eviction challenges.
• Due diligence before bidding is critical. Successful auction buyers research the property’s condition, occupancy status, value, lien position, surviving debts and local auction rules to determine a firm maximum bid and avoid costly surprises.
• Auctions require fast cash, discipline and legal awareness. Buyers must understand auction types, fees, payment timelines and state foreclosure laws, secure financing in advance and avoid emotional bidding that can quickly erase potential savings.

Buying a house at auction can be a great opportunity to purchase real estate at a discount, but it’s risky.

Auctions often follow a foreclosure, where a bank or lending institution must sell a property after a homeowner stops paying the bills.

Homeowners associations (HOAs), the IRS and local taxing authorities can also foreclose on a property owner for failing to pay their HOA fees, property taxes or income tax.

Foreclosure auctions are conducted by the local court or sheriff's office, depending on the state or county where the property is located.

An absolute auction sets no minimum amount for a winning bid. It starts and stops at any price. These types of auctions receive the highest response from bidders.

A minimum bid auction starts with the lowest purchase price that the institution will accept. It is normally the total debt owed plus interest, attorneys' fees, auction fees and other fees from the foreclosure process.

If no one bids at or above that number, it is “sold” to the institution and becomes a real estate owned, or REO, property.

With a reserve auction, the seller sets a minimum bid requirement but doesn’t share it to drive up bidding. The seller can accept or reject the offer but will not counter as with a typical real estate transaction.

One of the easiest ways to find real estate auctions is to look at homes for sale on Homes.com. You can filter the results for multiple listing types, including auctions, foreclosures and short sales.

Online auctions are what you’re most likely to encounter. Bids are made electronically and the auction is usually completed in a few minutes or reviewed over a few days. Sometimes bidders must pre-register and physically appear on the live stream to place bids.

Buying a house at an auction isn’t like buying a home on the traditional housing market. “Definitely do your due diligence in advance,” says Robert Arnold, the owner and broker of Sand Dollar Realty in Altamonte Springs, Florida.

Before bidding at real estate auctions confirm and research:

• Condition of the property
• Occupancy of the property 
• Estimated value as-is and if repaired 
• Lien position of the foreclosing party 
• Other liens or fees that could survive the foreclosure auction 
• Unpaid property taxes 

Auction properties are sold in as-is condition and may be occupied by the homeowner or a tenant. It's unlikely that you can get inside to inspect the interior before bidding. Arnold recommended at least driving by the property to assess its potential condition.

Your limited access to the property will make it hard to determine the current value and the repairs needed. Try to value the property based on its assumed condition and have a budget for potential repairs. This can be done by looking at comparable properties, or comps, in the immediate area that are similar in size, style and condition. The comps that you see and the estimated cost of repairs should determine your maximum bid.

If the property is occupied, you may have to evict the resident to gain possession, adding to your cost and timeline.

The title is conveyed as is when buying a house at auction. “If there is a title problem or a senior lien, the buyer will have to deal with it after the auction,” said Arnold.

You can order a title search on each property you plan to bid on, but that can get expensive. It’s best to learn how to perform due diligence.

Certain liens can outlive a foreclosure and complicate a future sale. For example, IRS liens or federal liens might be attached to the property. Unpaid taxes, HOA liens, municipal code violations or past-due utilities will also be conveyed with the property and can be costly for the new owner.

Confirm the lien position, understanding if the foreclosure is due to a first-mortgage lender, a second-mortgage lender or a taxing authority. Public records will list any liens, including IRS, HOA and federal liens that could outlive a foreclosure.

You can check tax records online in most counties to see if they are current or how much is owed. Call local municipalities like the water and electric companies to see if any debts are owed, too. It’s also a good idea to call the code violation department. Sometimes, violations are accumulating fees but haven’t been publicly recorded yet.

Since every county and institution sets its own rules, any bidder should ensure that they fully understand the auction terms and conditions, as well as state foreclosure laws. This includes how quickly the money needs to be paid in full to secure the bid. If you are unsure about any term or condition, contact an attorney.

Foreclosure auctions don’t allow traditional financing since the funds must be paid within a day or two from the auction date. If a buyer does not have cash, they can try to secure a hard money loan, which is an asset-backed, short-term loan from a private company.

Make sure you add the cost to repair the home if needed and account for closing costs and auction fees as a part of the financing amount. Real estate auctions can have fees ranging from 1.5% to 5% of the winning bid. There are transfer taxes and recording document fees to pay for.

Plan to register on the auction site at least a week or two beforehand. Most sites will take several days to approve you as a bidder, so it’s good to review the process, bidding strategy and etiquette. Some counties may require a payment to participate as a bidder before the auction begins.

The name you register with will be how the property is vested at the sale if you are the winning bidder. Review the registration carefully for errors and consult with an attorney, who can advise if purchasing as an LLC or other entity would be better than buying in your name.

Auctions have a specific start time. Log in beforehand and be ready to follow the bidding etiquette.

If it’s an open auction, bids will be publicly shown so you can see the highest amount. If it’s a blind auction, other bids will not be shown, so the best strategy is to place an aggressive offer that doesn’t exceed your maximum bid.

Don’t let your emotions drive your bidding strategy. You’ll want to avoid getting caught up in the auction process and bidding over budget or more than the property is worth.

If you make the winning bid, you’ll need to secure your position with the selling institution. Some counties will automatically credit your initial deposit to hold your spot.

Most counties require the full amount to be paid within 24 to 72 hours by cash, cashier's check, money order, certified check, official bank check, government-issued check or with a trust account check if an attorney delivers it. 

The county will begin with title transfer and recording the required documents after the full purchase price is received. This can take a few days to a few weeks, depending on the county. 

Challenges can still arise even if there aren’t issues with closing and payment. Depending on the state, homeowners have a right of redemption after a foreclosure sale. This means that they can take the property back if they can pay the amount in full. It’s rare to see this happen, but it is something to understand before bidding.

After closing, you are responsible for paying property taxes and will be taxed for capital gains on the sale of the property in the future.

How do I find auction properties in my area? You can find auction houses in your area by looking at homes for sale on Homes.com. From there, you can filter the results by listing type, including auctions.

Can I finance a property purchased at auction? Most counties require funds to be deposited immediately or within 24 to 72 hours from the auction date. For that reason, buying an auction property with traditional financing isn’t usually an option. However, you can secure a hard money loan beforehand if you don’t have the cash on hand.

What are the potential risks of buying a house at auction? The inability to access and properly assess the condition is one of the biggest risks. This makes it hard to properly value the home and know what to bid. Title issues, including surviving liens and unpaid taxes and other fees, must be paid after closing. If the property is occupied, you may have to evict to gain right of possession.

How long does the closing process typically take for an auction property? The closing process can take as little as a few days, but it takes a few weeks in most counties.

This story was updated on April 9.