Are you intrigued by the opportunity to buy property at auction but unsure about how to navigate the system? Knowledge is power before and during an auction, so take the time to educate yourself about the process before jumping in.

Who is the auctioneer and what is his or her role? The auctioneer works for the mortgagee and has the objective of making as close as possible to a full recovery on the client's loan. The auctioneer aims to get the highest possible value at the auction, which may not coincide with the debt owed by the borrower. While the lender wants to make a full recovery, that is not always possible or practical.

The auctioneer also seeks to protect the debtor's interest and return any equity they have in the property, beyond the mortgage debt. So, the more money the auctioneer gets for the property, the more satisfied the mortgagee and the owner .

As part of this initiative, the auctioneer proposes and executes the marketing effort for the auction and conducts the auction on the premises. While the attorney for the mortgagee is responsible for publishing three consecutive legal notices in a designated newspaper at least 21 days in advance of the auction, the auctioneer is charged with all commercial advertising.

On the day of the auction, the auctioneer places a red flag on the property, reads the legal notices to the public and registers all qualified bidders, who must present a check or cash per the published auction terms. The sale, called a "public outcry auction," is then conducted.

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Preparing for Auction
Potential bidders should learn as much as possible about the auction process and about a specific property before bidding. Visit auctions to observe the process and become more comfortable with it. You can also find substantial information through public records and other avenues such as ForeclosuresMass.

When you're ready to jump in, remember that your goal is to be the highest bidder at a price you're comfortable with. Here are some strategies to help you achieve this goal.

• Ask the auctioneer about the position of the mortgage being foreclosed. If it's not a first mortgage, the winning bidder becomes responsible for any prior mortgage liens as well, in addition to any municipal liens.
• Visit your town or city hall, assessor's office, and treasurer's office. You can learn about the property description, taxes owed and other municipal liens - water, sewer, etc.
• Visit the Registry of Deeds to research the title on the property.
• Consider working with a broker to get an idea of what comparable properties are selling for if you're not intimately familiar with the local market.
• Visit the property but know that you are doing so at your own risk. Debtors are typically not happy about the situation, but they may be willing to talk with you. Knock on the door with the legal notice and your driver's license and explain why you're there. Explain that the more you know, the higher you can bid and the more money the debtor may potentially receive. If the owner refuses to show you the property, you can still learn some information just by looking in the front door. Typically, what you see at the entrance is representative of the property - if it's pristine, the entire home is likely in good shape.
• Quantify your bidding risk. Evaluate what you know and what you don't know.
• Establish your top number, the maximum amount you would feel comfortable paying for the property.

At the Auction
Auctions are typically held during the workweek - rain, snow or shine. Be prepared for last-minute postponement or cancellations. Several factors contribute to an auction being postponed or cancelled - debtors may file for bankruptcy, come up with money to pay off the loan, negotiate a work-out agreement with the mortgagee or work with a third party on a short sale to satisfy the debt.

The number of people attending an auction varies widely, depending on the property. Sometimes just the auctioneer, mortgagee and their attorney are in attendance. At other auctions, 50 or more potential bidders may show up.

During an auction, follow these tips to maximize your success.

• Stay committed to your top number but be prepared to respond to the marketplace.
• Be wary when talking with other bidders, registered or not. You are competing with them. If they say negative things about the property, remember that it's in their interest to discourage your interest.
• Avoid any temptation to talk with other bidders about their plans. For example, if several properties are being offered at auction that day and a bidder approaches you to say "If you don't bid on this one I won't bid on the other one," that qualifies as collusion - a serious crime under the Sherman Anti-Trust Act.
• Remember to bid! If your top number is $200,000 and the auctioneer is calling for that price, jump in! It may just stop with you and you'll get exactly what you came for.

Buying property at auction is an excellent opportunity. Taking the time to learn about the process and each individual property can reap significant rewards.

Dale W. Schaetzke, CAI, AARE, is president of Auction Marketing Group in Shrewsbury, MA (www.auctionmarketinggroup.com). You can reach him at 508-842-1900 or by email at amg1000@cs.com.

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