how come some foreclosures are auctions and others arent?

Question

agents always send me some foreclosure properties that need some work. and then they say make a bid and see what the bank says.

how come they do that compared to the foreclosure auctions where there are a bunch of investors outside the house making live bids?

Mitch Messer · Answer

Hi Gary,

That first category you mentioned are properties that have already gone to the foreclosure auction. No one bid on them, so ownership went to the bank. These are therefore called REO properties, for "real estate owned" (by the bank). The bank lists them with an agent who calls you to see if you want to make an offer.

The second category are, as you said, bank foreclosed properties being sold at auction to the highest bidder.

Jim Viens · Answer

Gary W. most, if not all, foreclosures you see listed on auction sites (like auction.com, hubzu, et al) are REO properties where the bank has opted to list them through an auction house to sell after they've acquired them post-foreclosure. The other type of auction these types of properties could be purchased at would be the actual foreclosure auction held at the county courthouse. The courthouse auctions are a VERY competitive environment and not recommended for the beginner. You'll also likely not hear about these auctions from an agent.

Mitch Messer · Answer

@Gary Wilson On average, auctions probably carry the potential for bigger profits; They can also put you on the fast road to financial ruin if you make even one minor error in judgment!

Not to get all folksy, but if you're just learning to swim, it's better to spend ample time in the shallows perfecting your strokes before diving into the shark-infested sea.

Account Closed · Answer

@Mitch Messer

which one is more likely to make me a bigger profit? REO or courthouse auctions

Mitch Messer · Answer

@Gary Wilson Yes, REOs would be a much safer place to start. As @Jim Viens points out, the courthouse auctions are a high-stakes environment best reserved for the experienced investor.

Account Closed · Answer

@Mitch Messer

so would i typically have a better shot at going after the REO properties rather then the auctions?

how come some foreclosures are auctions and others arent?

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