Government Foreclosure Auction: What Is It?

It is likely that when you hear about government foreclosure you think of the police storming in and taking over someone’s home. But the government, and not just banks, can also seize property, farms, ranches, condominiums or mobile homes. For example, if you owe a lot of back taxes or default on a veteran’s assistance loan, the government can foreclose on your property.  A government foreclosure auction is held to resell this property, although the government also reserves the right to hand it over for social uses.

How the Process Works

You can access government foreclosure auction listings free of charge. There are paid services, but there really is no point in paying for what is widely available for free. If you can get online and search for the U.S. Treasury Department’s webpage you will have the listings at your fingertips. You won’t just find homes and farms listed, but often will find cars, boats, office equipment and sometimes rare books.

State Dictated Procedures

Participating in a government foreclosure auction is not the same as other auctions where you raise a hand to win and immediately take possession of your new property. Each state has its own set of guidelines as far as when, where, and how you place bids on these properties. While in one state you may need to bring a small percentage of your bid amount to win a home, while in another state it is required you bring the full amount in order to win the home. That is a huge difference in what you could be expected to pay right away.

Understanding Caveat Empor

As with any auction, there is no backing out of the deal once you are the winning bidder. You need to know as much information about that property up for a government foreclosure auction as possible before you decide on a bid. To ensure that you make a good purchase, you must look into the property to see what condition it is in.  You will have to determine if someone is still living there before you go about getting an inspection yourself.

If you really want to purchase a home that is still being occupied by the original owners, you can make a deal to buy the property before it is sold at auction. Many homeowners are interested in these deals because it stops the government foreclosure auction. You must first contact whatever broker is handling the auction in question. This is an issue over which your state law will decide how you proceed.

Thankfully, the government does not directly handle government foreclosure auctions. It is a common joke that if they did nothing would ever get sold! Brokers and real estate agents are put in charge of the auction and making sure everything is done according to that state’s law.