BiggerPockets

Had a property under contract which was in preforeclosure, 2 weeks before closing the property landed in foreclosure with the bank stating that the property would be sold on the court house steps. The only way to salvage the deal is to implement a new contract for 10k more than our original contract or purchase at court house steps. As I've never done auctions before would anyone share any insights as to the auction process, and what pitfalls I should be aware of.

Each state has different foreclosure laws, so it would depend on which state the property is located in. If the property has not been sold at the foreclosure sale, any lien holders must accept the payoff amount and release their lien.

Your post is unclear as to the terms of your purchase contract. The fact that the bank has stated they are going to foreclose should have no effect on your purchase, unless the foreclosure sale takes place before you are able to close and the lien is paid off. If you offer a more detailed explanation perhaps we would be able to give more specific answers.

I have been to few auctions and there has quite a dynamic to it, because the people that I have seen at them are regulars, and some are ready to play the bidding game. Some will just start jacking up the price without the intention of winning the bid but just to bid up interested people. You need cashiers checks ready to go. If you want to use a conventional loan then you will most likely need to wait and if the property does not get sold at the auction then you can walk down to the bank and make them an offer. I am not an expert at this and I don't know how other auctions work other than here is Southern California. Best of Luck.

Apparently the bank has already foreclosed and are saying that they are going to sell the property at court auction. Does it make sense to bid at auction since I'm looking to fund the deal with a conventional loan, and would this mean starting the loan process all over again.

Rodney, some of your statements are unclear. If the bank already foreclosed, then it already went to auction. Someone may have bought it already or it went back to the bank.

When is/was the auction date?

Do you need to negotiate a short sale or does your offer cover all liens?

You will need cash to buy the house at auction. I think in NC you need 5% of purchase price on day 1 and the balance is due at a later time. Not sure when, as NC has a unique auction process.

Okay, as of date of acceptance of offer I was told that this was a short sale that the bank and seller were in agreement with my offer, this was in late Sept. My lender stated that after the seller negotiating some issues with creditors and the bank we could close by 2nd week in January at the latest. Three days ago I'm told basically that the bottom fell out and the bank wants to call the loan, it turns out that the property was in preforeclosure status the entire time and there was no official statement of this given to me, and the bank stating that the file went to fha and they were no longer satisfied with the contract amount, and they would sell at auction. The bank also stated that due to additional fees to make the deal work the new number would be an additional 10k to cover what the seller owed outstanding on the loan and additional fees. Sounds a bit convoluted and I'm not willing to up my contract price by 10k and figure that at auction I may get a better deal. Just assuming that I'm not being strung along byany of the involved entities, and yes in NC I do need to bring 5% of bid amount to auction, although I'm not sure how this works out with my need to use conventional financing to close the deal.

Rodney, the additional $10K is most likely to cover the required legal fees (the largest being the trustee fee) for the courthouse sale. The details are spelled out under 'power of sale' in the deed of trust and in the NC general statutes. Don brings up good points, and if you have not covered all the bases you may be in for a financial disappointment. I hope you have a really good attorney helping you out.

I'm not sure this question has been answered...

In CA you have to have cashiers checks for the amount of your bid in order to purchase at the courthouse. Starleen pointed this out earlier and her assessment of the OC courthouses auctions is spot on.

What no one seems to have made a distinction on is whether or not you can finance courthouse purchases in North Carolina. I can't imagine this is possible, because of the need to satisfy the debt or have the property revert to the beneficiary right then and there, but I'm open to being wrong.

Don- you seemed to be well informed on the process in North Carolina, and Chris, you seem to live in North Carolina, can either of you shed any light on the feasibility of financing a courthouse trustee sale purchase in NC specifically?

Rodney's statement of "I do need to bring 5% of bid amount to auction..." kind of indicates to me that he's talking about one of those Williams & Williams, REDC type of auctions, not a courthouse auction. Just my $ .02

Although financing may be feasible, it does not sound very realistic because most lenders are going to require an inspection and appraisal and I doubt it can be reliably completed in the time allowed to pay the remaining 95%. If the OP wants to buy the house as an investment property, hard money funding may be more realistic and he can refinance it later through a conventional loan. Most HMLs (at least in AZ) require that the borrower agree not to occupy the property, so that could be a limitation if the OP wants to live in the house.