Banks want to get distressed properties off their books quickly, as it negatively affects the bottom line when they languish on the market. As the real estate owned (REO) inventory grows, banks are selling at auctions to decrease supply, so such auctions are gaining popularity. At bank auctions, homes are sold to the highest bidder. These auctions usually happen during public sales at county courthouses. Bank auctions give investors an opportunity to buy properties for less than market value.
The starting bid at an auction is based on the amount owed to the lender. The winning bidder wins the property in the same legal condition it was in before the mortgage was written. Prior to making a bid, be sure the amount you pay is comparable to similar neighborhood properties.