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How to bid on a foreclosure at auction
It’s interesting to title a post this way because it sounds so elementary…. How do you bid on a foreclosure? Well, you go to an auction, and when they ask for bids, you bid.
Okay, so it’s not REALLY that simple though. Perhaps a good alternate title for this post would be, “How to bid at a foreclosure auction without looking like you’ve never done it before.”
If this is your goal, you’ve come to the right place. The first step in bidding at foreclosure auctions is doing your due diligence beforehand. This means finding a property in default, looking at it in person to verify its condition, running some simple checks on its approximate market value, finding out how much is still owed, checking for other liens (apart from the one being foreclosed), checking for civil judgments against its owner, etc. The point is, there is a lot of leg-work that goes into this process BEFORE you ever get to the auction, but, for the moment, let’s assume you’ve done all that already.
Most foreclosure auctions occur at the local courthouse in the county where the property to be sold is located. You need to find out where and when the auction will occur, either from an ad placed in a local newspaper or from the posting of a notice of foreclosure in your local courthouse. (There are also several websites and aggregation services that will provide this info to you for a fee.) Arrive at the location of the auction (usually “the courthouse steps”) at least a few minutes early; we don’t want to risk missing the auction. When you arrive, there will likely be a few other people standing around waiting for the auction. If there are none, congratulations, you’re likely the only bidder.
Assuming there are other people, you will find that they often have very different “styles.” Some try to bring their “poker face” and will stonewall you if you try to talk to them. Most people, however, (particularly the ones that do this regularly) will talk to you. It behooves you to talk to them because these guys generally know what they’re doing and often observe some sort of pecking order of the people they know. More often than not, there will also be several auctions occurring at one time, so the other bidders will be interested what property(ies) you are there to bid on. You can generally answer these kinds of questions honestly because most people know beforehand which properties they’re going to bid on and what their “max bid” is for any given property.
This brings up what is probably the most important concern for YOU on auction day. You MUST know before you arrive at the courthouse what you’re bidding on and how much you’re willing to pay for it. This accomplishes two things. First, by having a plan before you arrive, you can avoid making costly mistakes in “the heat of the moment.” You don’t want to overbid, and if someone outbids your highest bid, you should not acquiesce to the temptation to “win” the auction. In foreclosure auctions, “winning” is making money, not losing it by overpaying for a property. Second, a more practical concern is that you must bring a check (certified, or a money order – NO PERSONAL CHECKS) made out to the clerk of the court for AT LEAST 5% of the successful bid. The best way to handle this is to decide on your maximum bid, then bring 5% of that. If you brought too much (i.e. you win the auction before getting to your “max bid”), no one is going to complain. Too little, and your bid doesn’t count.
In order to start the bidding, a trustee (or more likely, the trustee’s paralegal) is going to read a default notice explaining what property they’re selling and what gives them the right to auction it. You can pretty much ignore this, but you need to listen carefully at least until they get to the property description or case file number so you’ll know that you’re bidding on the right property. When your property comes up, the trustee will tell you what the starting bid is (this is the bank’s bid for the property). You should calmly offer a dollar more. If someone else begins bidding against you, you should bid to your maximum bid and then stop. There are all kinds of “bidding strategies” out there about how to bid to make people give up, but if they’re anything like you and have done their due diligence, they have a maximum number just like you and it’s going to take until one of you crosses over it before the bidding will stop.
If you are the “winner” of the auction, you will need to approach the trustee’s representative after the bidding and give them some extra information. They will have you fill out a form that declares you the high-bidder which will go on file in the clerk’s office just after the auction. In North Carolina, this begins the mandatory 10 day upset bid period. During this period, anyone can come along and outbid you provided that they offer at least 5% more than your high bid. If this occurs, they will be required by law to inform you of the upset by mailing a certified letter to you to the effect that you have been upset. At the expiration of the 10-day upset bid period, if no one has outbid you, the house is yours. I hope you’ve arranged financing by this point because the full amount of your bid is due in full. 
Good luck.