Anatomy of a Foreclosure Auction in Texas

A foreclosure auction in Texas is held in the county courthouse every first Tuesday of each month. It is here where a house that was not saved by a homeowner will be auctioned off to the highest bidder or where the lender will take it back if there is no winning bidder.

Every house sold in a home foreclosure auction represents a series of failures on the part of the borrower – failure to pay several monthly payments, failure to respond properly to notices of defaults and foreclosure and failure to work out a foreclosure prevention strategy with the lender. On the part of the lender, there is failure to work out a way by which the borrower can cover the missed payments and failure to use options offered under the Making Affordable program of the Obama administration.

To first time participants, the foreclosure auction is chaotic, with everyone pretty much left to his own devices. Most are scanning foreclosure listings given by a foreclosure tracking service and making computations. The others are comparing notes about potential profitable properties in hushed tones.

Other participants who have already studied the listings and have already made their estimates just wait for the trustees and county officials to begin the foreclosure auction.

In Travis County, the foreclosed home auction is usually held behind the old court building.

Enticed by stories of bargain homes that can be easily acquired, first time participants usually crowd the auction during the first hours. But as other bidders outbid them in each of the properties they were hoping to buy, most of the first timers would be gone by the middle of the day.

The foreclosed property auction is typically ruled by the investors – the ones with cash and cashier’s checks or the ones backed by real estate investment companies. Before the bidding, these investors have already made their calculations and have already decided when they should buy and when they should stop bidding.

At the foreclosure auction in June, based on the commotion and the fierceness of the bidding war, the most desired property was a large beautiful house appraised at $776,000 with the former owner having a mortgage balance of only around $300,000.

The winning bidder can make thousands of dollars in profits if he can get the house close to half of the appraisal. The bidding started at $298,000 and ended when a local investor raised his bid to $505,000.

Just like any other county auction, such are the ways of a foreclosure auction in Texas.

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