The term “auction” can be very confusing in real estate because it is used for two different types of public sales.
First, there is the type of auction we all think about – you know, the one with the fast-talking auctioneer who has several properties to sell in one afternoon. Usually those auctions are organized by a bank who owns several properties. There is a lot of advertising and hype in hopes of creating bidding excitement.
Second is the auction that is held as a result of Foreclosure. You may have heard the term “Sale on the Courthouse Steps”. At the end of the 120 day foreclosure period a representative, at an appointed place (courthouse, title company), calls out for bids on the property. Almost always the highest bidder is the lender because he has more invested in the property than other bidders will pay. And also because there is some risk involved in buying a property with no contingencies or title insurance. So, the bank takes the property and it becomes an REO to sell another day.