Learn the New York Foreclosure Processes:

Step 2: Foreclosure Auction: The Auction is Scheduled

The second step in the foreclosure process is the foreclosure auction itself.

If the Defendant (also called the mortgagor) fails to respond to the Summons and Complaint issued by the Plaintiff, then the Plaintiff's attorney must submit a report to the court stating the facts of the case and requesting that the court appoint a Referee (an attorney who ultimately conducts the foreclosure sale). The referee issues a report that includes a computation of the amount due the lender. The judge then signs a Judgment of Foreclosure and Sale that directs a Notice of Sale to be published and the referee to sell the property at auction. The court then assigns a date and time for the auction and the auction date and time is published in the Notice of Sale in a local newspaper approximately 4 weeks prior to the auction.

Painstaking Research: The Secret to Your Auction Success

A foreclosure auction can be an intimidating place for an unprepared participant. In preparing for an auction, keep in mind that in most cases, you can only view the property from the outside, and the property is sold "as is". When doing your research be thorough.

The pros check out the property in person. Never make your assessment relying solely on pictures of the property. A photograph will never give you a complete picture. For instance, is there a tenant living in the property? A photograph can’t tell you that, an in-person inspection can. And, if there is a tenant and they are not paying their rent, guess what? If you buy the property at auction, they will become YOUR non-paying tenant! The property may have other problems like a mechanic’s lien or a sidewalk violation or violations from the department of buildings. All this will become your headache and responsibility to clear up if you buy the property.

You can do much of the property research on your own. Using the block and lot number and other important details provided in NYForeclosures.com’s listings, you can do advance research on the property on the Internet, in the City Register’s office and at the County Courthouse. Our <Online Research Center> is a great place to start!

At the Auction: Going once, going twice….SOLD!

The foreclosure auction takes place at an assigned date and time, usually at the County Courthouse. The auction begins with announcement of the action, (the plaintiff and the defendant) and the reading of the terms of sale. Then the bidding begins, usually opening at $1,000. The bidding continues quickly until a high bid is reached. The high bid usually must be above the Plaintiff’s upset price. If bidding is not above this amount, the Plaintiff has the option of having the property revert back to them.

It’s important to remember that auctions are risky. While it’s the place where you'll often find your best foreclosure deals, once you’ve won the bid and made your 10% down payment there is no turning back. Therefore, make sure you know EVERYTHING about the property AND have financing lined up BEFORE you decide to bid!

At the Auction: After the Gavel

If there is a high bidder, that bidder meets with the referee, signs some papers and gives the referee the 10% down payment. The high bidder receives a referee’s receipt and the auction is over.
If you are the successful high bidder you will be required to make a 10% down payment (usually in the form of a certified check or bank check made payable to the referee) and you must close within 30 days. Should you fail to close within 30 days you will forfeit your 10% down payment and your claim to the property.

Someone representing the Plaintiff in the foreclosure action usually attends the auction. They do this to protect the Plaintiff’s interest in the property. Occasionally, the bidding will not go as high as the Plaintiff’s upset price. If this occurs, the Plaintiff has the right to refuse the final bid and take the property back. This gives you the opportunity to directly approach the Plaintiff’s representative immediately after the auction has ended to strike a deal. This strategy will give you first crack at buying the property directly from the Plaintiff. This method is not as risky as buying the property at auction itself, as you can now work with the Plaintiff and modify the terms of sale if need be.