What is 'Lender Confirmation Auction'

A lender confirmation auction is a type of foreclosure auction where the highest bid must be approved and accepted by the lender holding the mortgage. Lender confirmation auctions are different than an absolute auction, in which the winning bid takes ownership of the property.

BREAKING DOWN 'Lender Confirmation Auction'

The lender confirmation auction is advertised as being subject to lender confirmation. The auction proceeds as normal, allowing interested parties to place bids on the property; however the property doesn’t necessarily get transferred to the highest bidder.  

A short sale is another type of real estate transaction where the purchase bid must be subjected to lender approval. However, with a short sale the process is more like a traditional purchase transaction as there is no auction. The property is listed by a license realtor and show to prospective buyers. Once a buyer puts in an offer to purchase the property, the lender must review and approve the transaction since they will be accepting a lower payoff amount than what is owed on the mortgage.

In a lender confirmation auction, the homeowner has been removed from the process. The foreclosure process has already been begun and in most cases the property has already been vacated prior to auction. The lender also has an acceptable bid price that they will accept to move forward with the transaction.  

What is a Real Estate Owned (REO) Transaction?

In the event of REO sales, the bank has already processed the foreclosure and taken ownership of the property. In most cases, these properties are maintained by management companies working on behalf of the bank. Since these processes take longer to conclude, it is not unusual for an REO property to be in less than fair condition. Often these properties have sat vacant for some time or have been damaged by storms, homeowners or neighborhood kids.

As with short sales, these properties are listed for sale and prospective buyers tour them and decided whether they would like to put an offer in. Generally, the bank has already determined the amount that they will accept and that is their asking price. The terms of the purchase are as is and the bank retains the right to refuse to make any repairs that the buyers lender may require for closing. It is not unusual for investors to purchase these damaged properties and fix them or update them in a way to sell them for a profit, a practice that is commonly referred to as flipping.

  1. Auction

    An auction is a process where potential buyers place competitive ...
  2. Auction Rate

    Auction rate is the interest rate that will be paid on a specific ...
  3. Auction House

    A company that facilitates the buying and selling of assets, ...
  4. Auction Market

    An auction market is one where buyers and sellers enter competitive ...
  5. Judicial Foreclosure

    Judicial foreclosure refers to foreclosure proceedings that are ...
  6. Bank-Owned Property

    A bank-owned property is a type of property is taken back by ...
Related Articles
  1. Investing

    How to Buy a Foreclosed Home

    Finding and buying foreclosed homes is a lot easier than it used to be. But there's still a lot to navigate.
  2. Personal Finance

    Auction Rate Securities: Bidding On The Long Run

    These investments do better with a long-term horizon. Should you buy them before they're going, going, gone?
  3. Investing

    What Is A Short-Sale Property & How Does It Work?

    A short sale is an alternative to foreclosure whereby indebted owners get permission from a bank to sell their house for less than amount of the mortgage.
  4. Managing Wealth

    3 Reasons To Buy Government Surplus for Your Small Business

    Learn why it's wise to access government surplus auctions to buy furnishings, equipment and other items to start a new business or expand an existing business.
  5. IPF - Mortgage

    What Are the Main Types of Mortgage Lenders?

    Shopping for a mortgage lender can feel confusing and a little intimidating. Understanding the differences among the main types of lenders can help you narrow down the field.
  6. Investing

    Find Income-Generating Properties Online

    Discover the best websites for finding valuable properties that can earn you income.
  7. Retirement

    When Are Mortgage Lenders Better Than Banks?

    Individuals seeking a mortgage loan should consider factors or circumstances that may make a mortgage lender a better choice than a traditional bank.
  8. Investing

    Can You Dispute A Foreclosure?

    The bank has foreclosed on your mortgage, but do you really have to leave? Learn how to fend off the lenders and gain the time you need to save your home.
  9. Managing Wealth

    Top Ways To Profit From Storage Auctions

    Here are some extremely valuable tips to help you become an expert at finding deals at storage auctions.
  10. Investing

    Buy Your Next Home From Uncle Sam

    As a result of rising foreclosures, some Americans will buy their next home from the U.S. government.
  1. Is it possible to refinance a house you're renting out?

    Find out whether it is possible to refinance rental property. Lenders have strict qualifying standards and expect owners ... Read Answer >>
  2. Does inflation favor lenders or borrowers?

    Find out under what circumstances inflation benefits borrowers more than lenders and in which situations inflation can be ... Read Answer >>
Trading Center