If My House Goes to Foreclosure Auction, Does Anybody Actually Buy It?

Nationally, the odds a stranger buys your house at auction instead of the bank taking it back are better than they were a year ago. In Southwest Florida, they’re some of the worst in the country. Both of those come from the same report, and which one applies to you comes down to a number you’ll probably never see in advance.

What Actually Decides Whether Somebody Buys It or the Bank Takes It Back?

When your lender takes a house to a foreclosure sale, it sets an opening bid before anybody shows up. That number is called a credit bid, and it’s usually set against what’s still owed on the loan. Set it near the house’s full value and no investor can make the math work, so nobody outbids it and the bank ends up owning the house again. Set it lower, and a third party buys it that day.

Auction.com runs the marketplace where a large share of the country’s foreclosure sales and bank-owned resales actually happen, and it publishes what moved across its platform every quarter. Everything below comes from Auction.com’s own marketplace, not a count of every foreclosure sale in the country. It’s a large slice, not the whole pie.

Are Foreclosure Auctions Actually Going Up?

On Auction.com’s marketplace, completed foreclosure auctions in the second quarter sat at 66% of where they were in the first quarter of 2020, up 23% from a year earlier. Scheduled auctions (sales put on the calendar) reached 71% of that pre-pandemic level, up 13% year over year and the highest in more than six years. Both numbers have now climbed year over year for six quarters running. None of that is a count of houses. Auction.com publishes no property counts in this report, only how today compares to a 2020 benchmark.

What Kind of Loans Are Showing Up at Auction?

Auctions on VA-backed loans are at 106% of their pre-pandemic level, up 14%. FHA loans are at 95%, up 47% in a year. Loans backed by Fannie Mae or Freddie Mac are at 68%, up 27%. Government-backed borrowers are the ones showing up most, and most of them couldn’t tell you which of those three programs they actually have.

Then there’s the age of the loan itself. Loans written in 2022 or later made up 45% of every foreclosure auction in the quarter, the largest share of any origination year, and up 104% from a year ago. Loans from the 2005 to 2009 crash years were 10% and falling. That’s not the old distress finally working its way out. It’s people who bought at the top of the market four years ago, at the price and the payment that came with it, and have run out of room since. That 45% describes a share of what showed up at auction. It says nothing about what percentage of all 2022 loans are in trouble.

Does Florida Match What’s Happening Nationally?

No, and it doesn’t contradict the national number either. Florida is named as one of the highest-volume states in the country for completed foreclosure auctions. Florida is also on the list of states whose volume is still below where it was in the first quarter of 2020, alongside Georgia, Illinois, Ohio and California. Texas, Arizona, Minnesota, Louisiana and Colorado are the ones running above their 2020 levels. Big and rising isn’t the same as worse than it used to be, and Auction.com’s own report puts both of those in the same paragraph.

What About Cape Coral, Tampa, and Pensacola?

Three Florida metros get named individually in the report, and two of them show up twice.

Cape Coral and Fort Myers had one of the five lowest foreclosure sales rates in the country, and one of the five highest seller credit bids, above 73% of value. Those are the same fact said two ways. When the opening bid gets set that high, almost nothing sells to a third party, and the house goes back to the lender.

Tampa had one of the highest levels of buyer willingness to pay in the country, and it was also on the short list of markets where seller pricing went up during the quarter. Pensacola shows up on both of those same lists.

So if the question is whether anybody buys your house at the auction, the honest Florida answer right now depends on the county, and on what your lender decides to open the bidding at. That number isn’t public before the sale.

What’s the Rest of the Country Seeing?

Lenders, on average, priced lower this quarter. Seller pricing dropped from the prior quarter in 69 of the 99 metro areas Auction.com measured, and the gap between what lenders were asking and what buyers would actually pay narrowed by more than 300 basis points in a single quarter. Buyers responded. The share of auctions that actually sold rose 12% from the prior quarter, to 114% of the 2020 benchmark.

One more number worth sitting with. The share of bank-owned auctions on vacant houses is near a six-year high, at 54%. More than half of what banks are reselling had already been walked away from before the sale ever happened.

So What Does This Mean If My House Is Headed to Auction?

Nothing here tells you what your own lender will set as its opening number, and nothing here predicts what happens to your file. What it does say is that nationally, more of these sales are going to third-party buyers than they were a year ago, and in parts of Florida, especially Southwest Florida, they mostly aren’t. Where your house lands inside that depends on your county and on a number your lender hasn’t published anywhere.

Jacksonville, Florida is where I work, and distressed property is most of what comes through the door here. Happy to talk through where your situation fits into any of this.

JimArmstrong904@gmail.com, or (904) 671-4161 if talking beats typing.

Jim Armstrong, REALTOR, Momentum Realty, SFR (Short Sales and Foreclosure Resource) certified. This is general information, not legal, tax, or financial advice.

Momentum Realty is not associated with the government, and our service is not approved by the government or your lender.