Typically the commissioner will hold 2 open houses if the property is a house or has a residential structure. Some commissioners will conduct open houses for vacant land but it is not typical. I think it is a must to go to the open house if you are planning to bid on the property. At the open house you should ask the commissioner the following questions.

1. What are the underlying liens? Is there 1, 2 or more mortgages on the house? How much are they?
2.  Who are the lien holders? (national bank vs. local lender)
3.  Is the house/property vacant or occupied? If occupied owners or tenants, what are their plans to move? Is there a lease? Do the occupants look like they are packing? Are they agreeing to move once the foreclosure sale is completed? Or are they saying they are not going to move until the sheriff throws them out. The commissioner will not evict. That will be the buyer’s responsibility.

The sale will be held at the courthouse steps. Prior to bidding The commissioner will ask any prospective bidders to show their cashiers checks. 10% of the sales price will be due at the end of the auction. The commissioner wants to be sure bidders are qualified to bid and prepared. I recommend the cashiesr check should be made out to two people, the real estate commissioner, i.e. John Smith OR your name Joe Buyer. That way if you are not the winning buyer you can just deposit the check to your account. Although with most cashiers check this is not really necessary. Also be aware that the commissioner will probably NOT accept a cashiers check from out of state.

Usually there is no minimum bid at a foreclosure auction, however the foreclosing bank will normally put in their minimum bid. It will most likely be the mortgage or market value, which ever is less. For example if the property is worth $500K and the foreclosing lien holder has a mortgage of $600K, they will probably only bid to $500K. But in an escalating market their value and bid may be outdated. The bank may bid only $500K when the value may very well be $575K. Sometimes the value of the house can be $500K and the mortgages are only at $400K. Definitely an opportunity.

The auction has started, the bank bid $400K, if you are the only bidder besides the bank, you can bid $1.00 more and be the winning bidder. However if there are multiple bidders the commissioner will want to see higher bid increment amounts. The best strategy is to stick with your budget, dont get caught up in the competition of winning. Egos make for bad decisions.

Didn’t win:

There will be others or you can bid again at court confirmation.

You are the winning bidder:

Congrats but don’t start making renovation plans yet. The sale is subject to Court Confirmation. (An approximately 60 day waiting period from the sale date) This is where the judge confirms the sale. But before it’s confirmed bidding can be opened up again as long as the bid is 5% over the winning bid. So if the winning bid was $500K another bidder can bid $525K. If this happens and the new buyer succeeds then the original buyer gets their 10% back. Because of the new bidding at court confirmation some bidders wait until court confirmation to bid.

The sale is confirmed:

Yay! The commissioner will ask you if you want to use a title/escrow company. Your answer should be “Yes”. You open escrow and have 30 days to consummate the sale. This is usually not enough time to get a loan. The sale is not contingent on you being able to get a loan. Your 10% down payment is at risk. You better be able to close. However I have seen reasonable commissioners who will give extra days as long as the escrow/closing is on track. Most local attorneys are great to work with. You should close with no delays or major issues.

Escrow should issue you a commissioners deed. This is a fully insurable title deed. Hopefully you had a smooth foreclosure experience and bought a great deal on the wonderful island of Kauai.

Update 2021:

The title company will want an affidavit from the foreclosing attorney or commissioner that the property was not a federally backed mortgage foreclosed on during the foreclosure moratorium

If you are unable to be present at a foreclosure auction to bid, you can be represented by an agent. Call me if you would like to explore this arrangement or just have more questions about bidding on foreclosures.

Like my advice/article? Buy me a cup of coffee.

Feel free to call 808 652-6174 or email me at kauaidreams97@gmail.com with any questions you might have or an appointment to look at properties. Aloha Julie.

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