How Foreclosure Auctions and Sheriff Sales Work

When a homeowner stops paying the mortgage, the lender can force a sale of the home. In judicial foreclosure states, the lender files a lawsuit and the court orders the sale, which is usually run by the county sheriff, the clerk of court or a court-appointed referee. These sales are often called sheriff sales.

In nonjudicial states, the mortgage or deed of trust has a power of sale clause, so the lender can sell without going to court. A trustee runs the auction, often on the courthouse steps or online, after mailing and publishing the notices state law requires.

1. 1The sale is announced in a notice of sale, published in a local newspaper, posted at the courthouse or on the county website, and often listed with the case number, address and opening bid.
2. 2The lender usually makes the opening bid, often the amount owed. Many sales are postponed or canceled if the owner catches up, files bankruptcy or settles.
3. 3Bidders register, often with a deposit of 5% to 10% or a cashier's check, and bid in person or online.
4. 4The winning bidder pays the balance by the deadline, often within 24 hours to 30 days.
5. 5In judicial states the court confirms the sale, and the buyer receives a sheriff's deed, referee's deed or trustee's deed.

• You usually cannot inspect the inside of the home before the sale.
• Some liens survive the sale, such as property taxes and, in some cases, senior mortgages or HOA liens.
• The former owner or tenants may still live in the home, and eviction takes time and money.
• Some states give the former owner a right to redeem the property after the sale.
• Sales are final and as is. Title insurance can be hard to get right after a foreclosure sale.