Anonymous
Anonymous asked in Business & FinanceRenting & Real Estate · 1 month ago

Is it possible to buy an auctioned house with a mortgage?

Long story short, my schmuck of a mother lost our family house because she hadn't been paying property taxes since 5 years, as was indicated by the county records which are easily accessible online.

According to the deed information, the house was purchased for $80,000 by a 20 year old girl, which surprises and befuddles me. Being that your average 20 year old doesn't even know what $8,000 looks like, let alone $80K, my assumption is that her parents co-signed a mortgage with her.

But is it possible to bid on a house and then seek a mortgage when they win? That sounds a lot messier than requiring bidders to have the funding they are bidding immediately at their disposal....what if someone were to bid, and then be denied a mortgage loan by their bank? 

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  • Hannah
    Lv 6
    1 month ago

    It is totally possible.  She probably would need to buy it all cash up front, as that is all that is usually accepted as a form of payment at auctions.  Don’t be too judgemental—I’m female and I bought my first house at 24 for $165K all cash no mortgage not that long ago.

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  • 1 month ago

    Auctions require a deposit--usually a pretty good sized one.  This is always going to be cash. After that, it is the buyer's responsibility to gain a mortgage on their own--and that's not to say a 20-year old can't. Age isn't a factor. Credit and money are the only two things that will drive that process. 

    If the buyer can't come up with the mortgage to pay for the home, they are going to lose that deposit. However, most bidders come to the auction already prepared with some way to pay for the home they win--so chances are very good that the 20-year old already had a pre-approval. It might have been parents, or other relatives, or who knows--maybe she inherited money. Either way, she won the auction and will have to pay for the house. 

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  • 1 month ago

    Most States require payment in CASH, with a very short period of time after the bidding ends.  The 20 year old most likely had the cash herself - it's very possible, or maybe her parents lent it to her.  That's on County foreclosures.  On an IRS tax foreclosure, check or cashier's check is required and is the only acceptable form of payment - per the Internal Revenue Code.

    Source(s): Certified Paralegal, with 25+ years' experience.
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  • 1 month ago

    If they were denied a mortgage after placing a winning bid, they would forfeit whatever deposit they were required to make before placing a bid. Auctions operate differently than purchase and sale agreements that contain a mortgage contingency clause.

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  • Maxi
    Lv 7
    1 month ago

    Yes it is possible to get a mortgage to purchase an auction home and it needs to be agreed and in place BEFORE, not after, immediately the deposit needs paying and 'normally' paid for within 1 week ( depends on the auction terms/conditions)........ I purchased my first home when I was 19 yrs old and certainly didn't need help frome anyone else to get my first mortgage and my savings paid the deposit

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  • 1 month ago

    yes, in my area, you can put 20% down and have a loan for the rest..you have to have the mortgage ready before you bid

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  • danxp2
    Lv 6
    1 month ago

    Buying a house via tax lien foreclosure is not the typical method of purchase so it is probably not the best idea to think general population to have the same financial situation as those looking to buy foreclosures.

    The parents could gift the entire 80K, they could have a life insurance payout for a dead grandparent or parent, they could have access to a trust fund, they could have been working all the hours they could get and saved up, they could be a front for a flipping company, they could come from home flippers and got the seed money for their own flipping, and there are many more options where the funds are coming from.

    Generally the funds need to be ready that day or within 24 hours so the time needed for a loan is limited, you better have all the paperwork in place before the auction and this is something banks might not be willing to handle. The auction locations themselves might have affiliated loan companies on hand looking to make great fees on the loans.

    Payment Options: Plan Ahead

    Buying a property at auction usually requires a lot of cash. Each auction company and county government has its own requirements for payment, but you will probably need cash just to secure your right to bid. Down payment amounts and methods of purchasing often depend on the property and the auction house. More flexible financing options may be available by purchasing a bank-owned property the traditional way: Auctions are not the only way to buy foreclosures.

    As for payment, bidders at an auction should bring cash, a money order, or a cashier's check for the sum required by the auction holder. Typically, you will have to pay for the property in full immediately after winning the auction. Occasionally, you may have until the next day to complete payment. Failure to complete the payment may result in forfeiting your deposit and being banned from future auctions. Be prepared to provide proof of funds to show you can complete the purchase. If you are bidding as an entity, such as an LLC, trust, or limited partnership instead of as an individual, you may need to show your entity documents.

    Winners go through escrow and closing just as they would with any other home purchase. Bidders at property auctions are often real estate investors who can afford to pay cash. For auctions that allow financed purchases, you’ll need to get prequalified ahead of time.

    Some auction houses prefer that you work with their affiliated lenders and will have those lenders on-site at the auction. However, do your research beforehand to determine the interest rates available from competing lenders. This information may give you some leverage.

    Also, be sure that you understand the auction fees you will be expected to cover. “Homes purchased at auctions many times have costs and fees from auctioneers, banks, attorneys, and other companies required to bring the property to the auction,” Humes said. “It is not uncommon to find 10% auction fees, bank interest and penalties, attorney fees, 12% sale carrying fees, and property preparation fees that are passed on to the buyer.”

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  • 1 month ago

    Why not go to the same place that you looked up the deed, get the contact information, and ask them about how their auctions work?  That's the only way to be sure.

    If I was running the auctions where I live, I'd say cash only, as I would only be interested in collecting taxes due, not managing a real estate sale that has contingencies.

    As for the buyer in that auction, for all we know, she had $80k in cash for some reason.  Some parents can write a check for that at any time.  There could have been an inheritance.  Or she could have saved up money from a job or investing, even at that age.  Or a combination of those.

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  • 1 month ago

    You can read the terms of the auction.  They might have had to pay the full $80K or provide a letter that they were approved for a loan.

    Most 18 year olds don't have access to $80000 but some due she could have inherited the money, a settlement from an accident, someone might have gifted her the house, or maybe she started a business when she was younger.

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  • n2mama
    Lv 7
    1 month ago

    Yes, you can buy a house at auction with a mortgage. You make a lot of assumptions about the woman who bought your mother’s home, but the short answer is that yes, it is possible.

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