How Do Real Estate Auctions Work? Buying a Home at Auction

Key takeaways

• Buying a home at auction may give you a lower price, but you could risk overpaying.
• Auctions are held online or in person, but you’ll need to show proof of funds in advance.
• Research the property in advance to identify red flags, such as liens or major repairs.

The homebuying process involves a lot of steps; however, there are non-traditional ways you can buy a home. One of these options is buying a home at auction. Buying at auction can move faster than a traditional sale, but it also offers fewer protections for buyers. If you’ve never heard of buying a house at auction, this Redfin article will outline the process for you. We’ll answer your questions about how real estate auctions work and what to bring on auction day. Whether you’re considering a home in Pittsburgh, PA, or are house-hunting in Raleigh, NC, here’s how you can buy a house at auction.

What is a real estate auction?

A real estate auction is a public sale of a property, either by a homeowner, homebuilder, the government, or a bank. Properties are typically sold to the highest bidder, though some auctions allow sellers to reject bids below a certain price. The most common type of auction is of bank-owned properties, where the bank auctions a home instead of selling it as a foreclosure. 

Reasons homes may be sold at auction

Properties may be sold at a real estate auction for a variety of reasons, but these are the most common.

Foreclosure: Lenders or banks may assume ownership of a property where the homeowner has defaulted on their loan. They may sell the home at auction to recoup the money they have already lost. 

Tax delinquency or other law violation: If someone fails to pay their taxes and owes the government a lot of money, or if they have violated some other type of federal law, the government can seize their property and then auction it off.

Estate sales: If someone has inherited a home they don’t want to keep, they may opt to auction off the home. This can also occur if there are disagreements between inheritors, financial problems, or a desire for a quick sale. 

Homebuilders with high inventory: Homebuilders may choose to auction a group of homes to sell them all at once, especially if they have sat on the market for a while without much interest from buyers.

How do real estate auctions work?

Housing auctions vary, with some guaranteeing the sale to the highest bidder, while others allow sellers to reject bids that are too low. Auctions are held online or in person. Knowing the types of real estate auctions and bidding structures can help you decide if it’s right for you and your budget. 

Types of real estate auctions

There are three common types of real estate auctions:

• Minimum bid auction: There is a minimum price that the auctioneer will accept, and it is generally published in the auction listing materials. The auction bidding will start with this pre-determined number. 
• Absolute auction: The property is sold to the highest bidder, regardless of price. There is no minimum bid and no option for the seller to reject the winning offer.
• Reserve auction: The seller picks a minimum bid they are willing to accept, but bidders do not know what this price is. The seller has the right to review the bids and accept or reject the highest offer within a set period of time.

Types of auction bids

At an auction, there are two primary types of bidding structures:

• Blind bidding: You’ll submit a bid without knowing what the competing bidders have offered. This option can be advantageous to sellers who may receive a much higher bid than expected. This format can increase the risk of overpaying, especially for less experienced buyers.
• Open bidding: You’ll submit bids knowing what the other bidders are offering. This option gives every bidder the opportunity to continue bidding until the highest bidder wins. 

Online vs in-person auctions

When you envision an auction, you likely think of an in-person event. There are many auctions offered in person or online, so we’ll cover the difference:

• Online auction: Many homes listed for auction are through online auctions, with a set time and date. Competition is usually tougher as it appeals to a larger group of buyers. However, it can be more convenient to attend multiple auctions online rather than traveling to an in-person auction. You’ll likely need to pre-register online and provide proof of funds in advance. 
• In-person auction: Traditionally, auctions have been held in person, with the date, time, and location published online or in papers. You’ll need to attend the auction in person to show proof of funds and bid on the property. Each auctioneer may have different bidding rules, but the auction will typically go on until the highest bidder wins. 

What to bring to a real estate auction

When you sign up for an auction, there will be requirements ahead of time and on the day of the auction. Here are some of the common items you need to bring on auction day.

• Cash, certified check, or cashier’s check: To pay auction fees, bidding fees, and an earnest money deposit on the home. Sometimes proof of funds is needed in order to register for the auction. 
• Loan documentation: If financing is permitted in the auction, bring your proof of financing that shows you are pre-approved to purchase the property.
• Photo ID: To show proof of your identity.

How to buy a home at auction in 6 steps

Buying a home at an auction requires a different approach than the standard method of working with a real estate agent, finding a home on the MLS, making offers, and negotiating with sellers. Here’s what you need to know if you’re buying a home at an auction.

1. Research the property

To find a home to buy at auction, you can start by reviewing auction listings. Research and learn about the homes scheduled for auction, as well as the dates, times, and locations. Your county recorder’s office or website is usually the place to find this information, or you can also check resources like the U.S. Treasury’s Real Property Auctions. 

Once you have narrowed down your options, take the time to drive by the homes and see what the condition looks like, what the neighborhood is like, and if there are any immediate red flags. You can look up the property online to see its history before making the decision to attend the auction. 

In some cases, open houses are held, allowing you to tour the property before the auction date to determine how much you’re willing to spend, what renovations will be necessary, calculate your bottom line, and estimate your total investment.

2. Determine a budget

Determining your maximum budget is critical when buying at auction. Your bid is final – there’s no negotiation afterward.

You may have more room in your budget if you plan to live in the home as-is. You may want to lower your budget if you expect to make significant repairs or remodel or resell for a profit. 

Here are some factors to help determine your budget:

• Look at comparable properties: Also called comps, comparable properties are recently sold homes in the area that have similar features, size, and layout. Real estate agents use comps to help determine a home’s value. You can also use comps to help determine what the house may be valued for. 
• Use an affordability calculator: A home affordability calculator can help you determine a reasonable budget for your homebuying goals. If the auction allows you to obtain financing, you can use a mortgage calculator to see how much you can afford. 
• Factor in home improvement costs: Homes for sale at auction may need additional maintenance or repairs, so it’s best to budget more than you think you need. According to a 2025 study by Angi, the average cost of a complete home renovation is $52,213, though this can be higher or lower depending on what needs to be completed.
• Determine closing costs and fees: You’ll still be expected to pay closing costs for an auctioned property, typically between 2 to 5% of the home’s purchase price. Many auction companies add a “buyer’s premium,” which is an additional fee paid to the auction house, often around 10%.

Once bidding starts, emotions can take over. Setting a hard limit ahead of time helps prevent overpaying.

3. Secure your financing

At most auctions, the winning bidder is required to provide a cashier’s check for the minimum amount the auction holder requires. You must pay auction fees and bidding fees as well as put down a deposit, called earnest money, before you leave the auction site. That means you’ll need enough liquid assets to cover these costs, typically 5 to 20% of the home’s value, in order to purchase a home at auction.

Some auctions do allow financing, though most do not. If you’re interested in a property that’s being sold at auction, find out if the auction permits financing and get pre-approved ahead of time.

4. Register for the auction

Registering for the auction is an important part of the process, as you’ll need to meet several qualifications in advance. Whether the auction is online or in person, there will be different requirements. Here are some of the common steps to expect during registration:

• Pre-registration: It’s common for auction companies to allow or require you to pre-register for the auction. You’ll typically need to submit personal information, show proof of funds, and agree to the auction company’s terms and conditions. 
• In-person registration: If you’re attending a live auction, you’ll need to register when you arrive in order to complete additional paperwork, show proof of funds, and receive your bidder paddle or number. If the auction allows financing, you will likely need to show your pre-approval. 
• Deposit requirements: In most cases, you will need a cashier’s check, certified check, or cash for your earnest money deposit. It’s often required to gain entry to the auction.
• Read the auction rules: Every auction’s rules differ, so read through them carefully. There are likely specific bidding rules, payment due dates, and conditions for purchasing. 
• Review the terms of the auction: Thoroughly read the auction’s terms and conditions, information about property disclosures, and allowed bidding increments. Conducting this due diligence can help you understand the auction process better. 
• Online auction requirements: If the auction you plan to attend is online, you may need to provide your credit card information for verification. You may also need to pay a refundable deposit to secure your spot in the auction.

5. Start the bidding 

On the day of the auction, plan to arrive early, whether the house you want to bid on is first or not. You can observe how the previous auctions are going and if homes are selling for reasonable prices or not.

Listen carefully to the auctioneer’s rules and any new information about the home. For example, if the home is “subject to all liens,” you would take responsibility for the liens on the home at the time of purchase. Know where you want to draw the line and stick to your budget.

6. Begin the closing process

If you are the winning bidder on the home, you’ll then proceed to pay the earnest money, bidding fees, and auction fees. From there, the closing process will begin, which can take around 30 to 45 days. Auction closings experience fewer delays, although it can still happen. If you miss payment deadlines, you could risk losing the house. 

Should you buy a house at auction? Pros and cons to consider

Auctions may seem like a great way to purchase a home at a lower price, but first-time homebuyers should exercise caution.

Pros of buying an auctioned property

• Potentially lower purchase price
• Faster closing timeline
• Less buyer competition
• Possible investment upside if purchased below market value

Cons of buying an auctioned property

• Homes are often sold as-is and may need major repairs
• Limited or no inspection opportunities
• Outstanding liens or title issues
• High risk of overpaying due to competitive bidding

FAQs about how real estate auctions work

Is buying a home at auction a good idea?

Buying a home at auction can be a good idea if it matches your homebuying goals and you’re prepared for any risks. You likely will not be able to get a home inspection in advance, and you could risk overpaying for the home. But if you have the room in your budget and are willing to take on major repairs, it could be a good fit for you. 

How can I avoid overpaying at an auction?

If you participate in an auction, make sure that you know the maximum amount you’ll bid and walk away when the bids rise higher than that amount. View homes for sale in your price range to get an idea of how much homes are selling for and determine a ballpark price range for the auction.

What is a buyer’s premium?

A buyer’s premium (BP) is an extra fee that the winning bidder must pay. The amount goes directly to the auction house to cover their costs. Buyer’s premiums can range from 10 to 25% of the purchase price. You should know the percentage in advance of the auction.

Do I need a real estate agent to buy a house at auction?

No, you’re not required to work with a real estate agent if you want to buy a home at auction. A good real estate agent can give you advice on finding the right home for you, but you don’t need a real estate agent when buying an auctioned property. 

Do I have to attend auctions in person?

As mentioned above, there may be homes auctioned off online that do not require in-person attendance. However, if the auction is in person, you most likely need to attend, or you may be allowed to bid via phone or an in-person representative. The rules vary by auction; be sure to read the requirements thoroughly before signing up.

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