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Buying A House At Auction: A How-To Guide

12-Minute Read
Published on November 22, 2022

If you’ve been trying to buy a home during the last few years, you know that it’s hard out there. Even as demand eases in the current rising interest rate environment, housing inventories are low, prices are high and even seasoned investors are having trouble finding bargains.

You might be thinking of stepping outside the traditional home buying process to avail yourself of more house buying opportunities. One route that you may be considering is buying a house through a real estate auction.

Let’s take a look at what it means to buy a house at auction, how the process works and the pros and cons of pursuing this course.

Should I Consider Buying A House At Auction?

Real estate auctions have long been the domain of experienced real estate investors. However, technology has made home auctions more accessible to everyone. With the stiff competition for available houses in the real estate market, more and more home buyers are venturing into this arena to find a home to serve as a primary residence.

There are many benefits to buying a house at auction. Most people pursue this option because there is the potential of finding a really great deal. You could find a diamond in the rough that could become a nice home, often at a discount.

When you buy a home at auction, you might face less competition than you would by taking the traditional home buying route. However, you will likely be going up against experienced investors, and there are greater risks and fewer consumer protections available to those who are buying a home at auction.

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How Do Houses End Up At Auction?

There are many different reasons a home ends up at auction, but usually it’s because the homeowner started having financial problems. Most houses end up being sold at auction due to foreclosure or property tax default.

However, more and more frequently, in highly competitive markets, prospective buyers are turning to the internet to buy their next home. iBuyers are comfortable buying a home online, and sellers are able to sell their home without staging and without having to remove all signs of  children and pets every time someone wants to see their home.

Where Do House Auctions Take Place?

Auctions are not a one-size-fits-all process and there are several different types you want to know about. Let’s look at the most common types of auctions you’ll come across.

In Person

We’ve all seen in-person auctions conducted in movies or on TV, with fast-talking auctioneers acknowledging barely imperceptible nods while giving competing bidders the opportunity to raise their own bids. For the uninitiated, walking into an in-person auction and making a bid might seem intimidating.

Live, in-person auctions still occur, though more often these days, auctions are moving online. Even if the auction itself is in person, you should be able to find the rules governing the auction online. In very small towns or rural areas, you might have to make an in-person visit to get a hard copy of them.

But understanding how the auction works will empower you to make a bid when the time is right. Likewise, attending in-person auctions and learning how they work is a great way to familiarize yourself with the process.


As we noted, auctions are moving online, where it’s much easier to access all the rules, guidelines and procedures. On most real estate auctions websites, you’ll have to preregister and prequalify to show that you’re a serious bidder with access to the funds to complete the transaction.

Being online makes real estate auctions much easier to access, which is a double-edged sword for prospective bidders. On the one hand, it makes it easier for them to access and get in on the potential deals. Plus, online real estate auction sites make it easy for newcomers to watch and learn until they feel comfortable jumping in. 

On the other hand, because hosting auctions online makes them easier for everyone to access, there’s now more competition at auctions than ever before. That in turn reduces the likelihood of finding a bargain. If you’re a new investor, that can be disheartening. If you’re buying your next home, you’ll perhaps be motivated more by inventory than the prospect of a deep discount on the purchase price.

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How To Buy A House At Auction

Buying a house at auction could be a smart move, but it’s not the right choice for everyone. And if you decide to give it a try, you’ll need to have a thorough understanding of how the process works.

Weigh The Risks And Rewards

There are many potential benefits to buying a home at auction. For instance, you could buy a home at below market value and pay substantially less than you would’ve otherwise.

But you’re also taking on a certain amount of risk. You won’t be able to get a proper inspection before buying the home, so you could end up with property damage or problems you didn’t anticipate. You could also get stuck with back taxes that weren’t accounted for upfront.

And most likely, you’ll have to pay for the property in cash. Rarely will sellers accept financing for homes sold at auction.

Plus, there’s always the danger of potentially overpaying. This is an even bigger risk if you’re not an experienced real estate investor and haven’t researched the home and determined its market value.

Whether the potential gains outweigh the risks really depends on your personal situation. So be sure to account for these before moving forward with the auction.

Line Up Cash Or Financing

Most auctions require that you purchase the home in cash, so rarely can you take out a mortgage to buy the home. However, there are exceptions, so you’ll want to research the requirements ahead of time.

This means you’ll need to get your financing together before the auction takes place since there’s usually a tight turnaround time. If you end up placing the winning bid, those funds are typically due by the end of the day.

Most auctioneers will require payment by verified funding sources, like a cashier’s check. If you owe excess funds, those may be accepted within a few weeks of the sale.

Set A Budget

It’s important to set a budget before going to the auction. Otherwise, you may get caught up in the heat of the moment and end up overspending. Remember, the goal of buying a house at auction is to find a great deal.

Evaluate The Property

It’s highly unlikely that you’ll be able to inspect the property before bidding, though rules vary widely depending on the type of auction you’re considering. However, that doesn’t stop you from taking a look at the property on your own.

You can get some information just by taking a close look at the house. Take care not to violate any local laws on trespassing, but take along some binoculars so you can get a look from a legal distance.

Carefully look for signs that someone is living in the home – there shouldn’t be, but in some states, it can be up to the new owner to evict previous homeowners, tenants or even squatters. For the vast majority of bidders, taking on eviction proceedings is difficult, expensive and unpleasant, and you may have saved yourself an enormous headache by passing on this listing.

You’ll also want to do your own title search on the home. At the very least, visit the property clerk’s office and ask them whether a property has liens against it. Liens are claims that follow the property, not the property owner. That means that if the last owner didn’t pay taxes, you may have to.

If you can’t visit the home ahead of time, you should expect that some repairs will be necessary. And you should also do a lien search ahead of time, so you’ll know about any outstanding liens.

Bid Smartly

On the day of the auction, you should attend with the funding in hand. If it’s an in-person auction, you’ll sign in with the auctioneer and get situated. If you’re participating in an online auction, you may need to pay a deposit ahead of time.

Once the auction begins, it’s important to stay calm and not get caught up in the excitement. Keep your composure and bid responsibly. A house is still a significant expense and big responsibility, even if you do buy it at a deep discount.

If you can, try to attend a few other auctions ahead of time with no intention of bidding on anything. This will give you a sense of how everything works.

Close The Deal

The auction comes and goes and you walk away as the winning bidder. So, what happens next? Well, now it’s time to finalize the deal according to the guidelines set out by the auction house.

You’ll either pay the full purchase price or at least a deposit within 24 hours of the sale. And depending on the state you live in, you may be able to obtain ownership of the property immediately.

However, certain states do have something called a redemption period. This means that anyone who lost their home due to unpaid property taxes can buy it back within a certain period of time.

So, if you purchase a home at auction that is later redeemed by the original homeowner, you’ll be refunded for your purchase. But once the title is issued and recorded with the county, you will be the rightful owner of that property.

Types Of Auctions

There are several different ways to organize an auction. These are the most common you’ll encounter.

Absolute Auction Vs. Minimum Bid Auction

An absolute auction is a popular option for sellers who want a quick and simple real estate transaction. In this type of auction, the sale is always awarded to the highest bidder. And because the sale is guaranteed, absolute auctions tend to have a high level of participation.

There is no minimum floor at which the bidding must start, so the price always begins at $0. Absolute auctions can occur at many different types of venues, including live events or on an online marketplace like eBay.

A minimum bid auction is exactly what it sounds like – there’s a minimum bid amount to get started. Anyone who can pay above the minimum bid set by the seller can participate. The downside is that you’re guaranteed to pay a certain amount. Knowing that there’s no chance you’ll pay less than the minimum can cut down on competition by separating serious investors from tire kickers.

Reserve Vs. Non-Reserve Auction

A reserve auction means that the seller will only sell if the bid exceeds their minimum price. The reserve price is the minimum bid the seller is willing to accept for the property, and they are not required to disclose that information to potential buyers.

Bids below the reserve price can be entered, but the seller is free to reject all bids if they are deemed unacceptably low. A no-reserve auction does not allow the seller to reject any bid, no matter how low.

Open Vs. Blind Bidding

In open bidding, buyers can see each other’s bids and can decide whether to make a higher bid to exceed a more recent bid. In blind bidding, bidders submit their best bid without any knowledge of whether there are other bidders and if so, what their bids are.

Can You Buy A House At Auction Without Cash?

In most cases, you need to have the cash available. However, you may have sources of cash that you haven’t thought of. Let’s take a look at some of those.

Cash-Out Refinance

If you already own a home, you may have enough home equity to allow you to take cash out of your home. With a cash-out refinance, you can access the value you’ve accumulated, plus any appreciation your home has enjoyed, with a loan.

A cash-out refinance replaces your current mortgage with a new one. To get the loan, you’ll have to essentially go through the mortgage application process again, with an appraisal inspection and new title search. You’ll pay closing costs once again as well.

Home Equity Loans

A home equity loan is different from a cash-out refinance in that you keep your current mortgage, and borrow only what you need and have available through your home equity levels. For many people who got or refinanced a mortgage loan to take advantage of the historically low interest rates available a few years back, this is a much more attractive option as interest rates are rising.

A home equity loan is a second mortgage on your home. Like a refinance, there’s a new application process, appraisal and closing costs. Neither process is fast, so plan in advance to have the money available when you need it.

Personal Loans

This is a loan based exclusively on a borrower’s creditworthiness that is not secured by a property. These loans come at higher rates but don’t come with closing costs or any other processes involved in the refinance process. As an added benefit, you’re not putting your house on the line in the event that you’re not able to repay the loan.


There are several real estate crowdfunding sites available that allow those interested in passive real estate investment to invest in projects pitched by those seeking financing for their projects. As you build up a track record, you’ll have more success attracting these investors.

Pros And Cons Of Buying A House At Auction


You Might Get A Bargain

As we noted, in general, you might get a discount, depending on the competition you’ll be facing. Of course, if you’re not an investor, you may not be primarily motivated by the prospect of a bargain.

Keep in mind that one person’s bargain might be another person’s money pit. Many investors are also contractors who can handle large home repairs easily. It might not be a bargain to first time home buyers who have put all their cash into buying the home.

You’ll Have More Choice

At this time, the housing inventory is very low and prices remain high even as demand is slowly cooling. If you’re desperate to find a home you can afford, expanding your search into auctions may help you find a place to call your own.


House Is Purchased As-Is

When you purchase a house at auction, you will likely not have any opportunity to inspect it and there will be no opportunity to negotiate the price based on how much it will cost to make it livable. That’s because it is understood that the house is being purchased as-is.

If you are putting all your money into buying the home, you may not have the cash to undertake substantial repairs. Because these homes are no longer occupied by their owners, there’s no one to ask and there hasn’t been anyone in the home to keep up with routine maintenance.

No Consumer Protections

After the 2008 Financial Crisis, significant consumer protections were built into the home buying process. There are disclosures required by the Truth-In-Lending Act (TILA) throughout the process, stricter lending requirements aimed at ensuring a borrower’s ability to repay and clearer definition of the role of real estate agents.

None of those protections apply in the auction process. Most regulations are imposed on lenders and agents, neither of whom play a role in the auction process.

Must Have Cash

Almost all auctions require bidders to prequalify, a process designed to ensure that they will be able to settle up on the property in cash within a limited time, usually 48 to 72 hours, after winning an auction.

Previous Owners Can Reclaim Home Until The End

In some states, the previous owner can get their home back either by suddenly bringing their payments current or working out a credible repayment plan with the lender. For example, let’s imagine that the previous owner lost their home because they had fallen ill and lost their job, but has since recovered and gone back to work.

Until the title is yours, they may be able to prevent the sale. Check the laws in your state to avoid having to walk away from the property you were so close to owning.

Buying A House At Auction FAQs

Can I get my cash back after the auction purchase?

There’s a process called delayed financing which allows you to apply for a mortgage once you take ownership of the property. Usually, homeowners must wait 6 months before undertaking a refinance, but homeowners who purchased with cash can apply for what is essentially a first mortgage right away.

Our colleagues at Rocket Mortgage® offer delayed financing options.

Are there loans available to help you to buy a house at auction without cash?

Possibly. There are “hard cash” or “hard money” loans available, but these are high interest loans with short repayment terms. They are not suitable for anyone except experienced house flippers, whose intent it is to fix up the house as quickly as possible and resell it quickly.

However, real estate transactions are conducted pursuant to state law, and some states do allow bidders time to complete the transaction with a mortgage. Check your state’s laws as well as the rules available on the auction platform you intend to use.

Why are houses up for auction so cheap?

Prices tend to reflect both the amount of necessary repairs and the amount of risk that creates. An extremely low opening bid amount and lack of activity may indicate that more experienced eyes have looked at the house and decided to pass. With more and more auctions occurring online, you can expect true bargains to become harder to find.

The Bottom Line: Buying A House At Auction Comes With Risks

In some cases, you can find some attractive deals or at least additional housing inventory to consider. Auctioned homes can be purchased at a discount and you’ll face less competition. But you have to understand the risks and be able to cope with them. That can be particularly difficult for first-time home buyers.

If you’re planning on participating in an auction that will allow you to complete financing, start the process now and apply online today for initial approval.

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Miranda Crace

Miranda Crace is a Senior Section Editor for the Rocket Companies, bringing a wealth of knowledge about mortgages, personal finance, real estate, and personal loans for over 10 years. Miranda is dedicated to advancing financial literacy and empowering individuals to achieve their financial and homeownership goals. She graduated from Wayne State University where she studied PR Writing, Film Production, and Film Editing. Her creative talents shine through her contributions to the popular video series "Home Lore" and "The Red Desk," which were nominated for the prestigious Shorty Awards. In her spare time, Miranda enjoys traveling, actively engages in the entrepreneurial community, and savors a perfectly brewed cup of coffee.