Foreclosure and Sheriff's sale: Why the lender gets the house.

Every so often, you'll hear about buyers that want to buy property "at the courthouse steps" in an auction as part of a foreclosure.  Almost all of the time, the lender gets the property. Why?

More often than not, the minimum bidder the lender will accept is more than what the property is worth.  Just the outstanding mortgage alone is more than what the property is worth. On top of that, take into consideration other costs such as delinquent property taxes, legal fees, etc and the property loses it's "bargain" potential.

For example, there is a property I know of going to auction later this month. The current owner owes twice what the property is worth. No buyer will bid on that property because they can buy a different property for half what the bank will accept. They will also be able to buy a property that they have been able to inspect, tour, visit, etc. prior to making an offer.

Lack of access to the property prior to the auction is something that needs to be taken into consideration.  Chances are there is little or no access to the property before hand, so a property that may look OK from the street may be a disaster inside, which may lead to significant expenses to repair. Also, if the property has tenants in place, it will be you're responsibility - and expense - to evict them.

Most buyers will not pay more than what is owed since it is often more than market value. Buyers at the courthouse steps are typically looking for a bargain. Nearly all properties sold at these auctions are not bargains, so consequently the lender gets the property.