There is a home auction coming up the end of this month at the Peppermill. They are very exicting to attend and watch however they may not be the place to get the best value on a bank owned or REO property.
There are two types of auctions that can be held. The 1st type is an 'Absolute' auction. This is the type of auction that most people think they are attending. In an absolute auction the highest bidder gets the property regardless of the bid. There are no reserves. If you found an absolute auction that was selling at auction the 55 Chevy that we would all like to have and the highest bid was $100 then the car would be sold for a $100.
Now back to the real world. The type of auction that usually is held is labeled an Auction. Technically it is a reserve auction which means that a minimum selling price has been established for the property and if that price is not met then the property will not be sold. This auction type may or may not have opening bid amounts. The opening bid amount may have been set at a very low level in order to get interest in the auction. 99.9999% of the time the property will not sell for the opening bid amount. The owner of the property (the bank) will have established a reserve price which if not met then the bank will not accept any bid less than that price. The auctioneer has the authority to bid on the property up to the reserve price which means that the auctioneer is actually bidding to get the property to it's reserve price.
Along with reserve selling prices, many of the auction companies charge a 'buyer's premimum' in addition to the sales price. The amount of the premium can vary however I have seen many cases where the premium is 5% of the agreed upon purchase price. An example would be that if you got acceptance of a bid for a property at $300,000 then the auction company would add on 5% or $15,000 to the transaction bringing the actual sales price to $315,000.
In some cases the most you will pay for a bank owned REO property is what you would pay at auction. It may be better to have your Realtor(r) work with you to buy the property out right and bypass the auction.
Let me know if you have any questions.