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Foreclosure processAuction

Opening Bid

Also called Starting bid, Minimum bid

In short

An opening bid is the first bid at a foreclosure auction, usually placed by the lender. Other bidders must exceed it to buy the property; otherwise the lender takes it back.

Set by
Usually the foreclosing lender
Often based on
Debt owed or the lender's valuation
When disclosed
Varies; sometimes only at the sale
If not beaten
Property becomes REO

Where it fits in a foreclosure

Opening Bid belongs to the auction stage.

  1. 1Missed paymentsThe owner falls behind; the servicer sends notices and may offer workout options.
  2. 2Pre-foreclosureA notice of default or lis pendens is filed. The owner can still sell, catch up or negotiate.
  3. 3AuctionThe property goes to a public sale, usually for cash, as-is and often without an inspection.You are here
  4. 4Bank-owned (REO)If no one outbids the lender, it takes the property back, clears most title issues and lists it.
  5. 5ResaleA buyer or investor purchases, repairs and occupies, rents or resells the home.

How the opening bid is set

At most foreclosure auctions, the lender opens with a credit bid. The amount may equal the total debt, including interest, fees and costs, or it may be lower if the lender's valuation shows the home is worth less than what is owed. Some auctions also set a minimum bid by law or by the court.

Finding the opening bid

Some trustees and auction platforms post opening bids in advance; others announce them shortly before or at the sale. The amount in the notice of trustee sale is an estimate of the debt and may differ from the actual opening bid. Practices vary by state, county and trustee.

Using the opening bid in your analysis

An opening bid tells you the minimum you would need to pay, not what the property is worth. Compare it to your own estimate of value, repair costs and any liens that may survive the sale. If the opening bid is higher than your maximum, let the property go; it may come back to market later as an REO.

Example

Comparing an opening bid to your maximum

A lender's opening bid is $195,000. An investor's analysis shows an after-repair value of $320,000, repairs of $40,000, and holding and selling costs of $30,000, with a target profit of $40,000. The maximum bid is $320,000 - $40,000 - $30,000 - $40,000 = $210,000. The investor has $15,000 of room above the opening bid.

Opening Bid vs. Credit Bid

Opening Bid

An opening bid is the first bid at a foreclosure auction, usually placed by the lender. Other bidders must exceed it to buy the property; otherwise the lender takes it back.

Credit Bid

A credit bid is a bid at a foreclosure auction that the lender places using the debt it is owed instead of cash. The lender can bid up to the amount of its debt without paying any money.

The differenceThe opening bid is the starting amount at an auction, whoever places it. A credit bid is a bid the lender makes using the debt it is owed instead of cash, and it is often the opening bid.

Frequently Asked Questions

Related terms

Foreclosure AuctionForeclosure processA foreclosure auction is the public sale of a property after a borrower defaults, where the highest bidder buys it, usually with cash and as-is. If no one outbids the lender, it becomes bank-owned.Notice of Trustee SaleForeclosure processA notice of trustee sale is the public notice, in a non-judicial foreclosure, that sets the date, time and place a trustee will auction a property to repay the defaulted loan.After Repair Value (ARV)InvestingAfter repair value (ARV) is the estimated market value of a property once planned repairs and renovations are complete. Investors use it to decide how much to pay for a fixer-upper.REO / Bank-Owned PropertyForeclosure processAn REO (real estate owned) or bank-owned property is a home a lender took back after it failed to sell at foreclosure auction. The lender then sells it, usually through a real estate agent.The 70% RuleInvestingThe 70% rule is a fix-and-flip guideline: pay no more than 70% of a property's after repair value (ARV) minus the cost of repairs. It leaves room for profit, holding and selling costs.TrusteeForeclosure processIn real estate, a trustee is the neutral third party named in a deed of trust who holds legal title for the lender and can sell the property at a trustee sale if the borrower defaults.LienTitle & legalA lien is a legal claim against a property that secures a debt. It must usually be paid off before the property can be sold with clear title, and the creditor can force a sale in some cases.Title SearchTitle & legalA title search is a review of public records to confirm who legally owns a property and to find any liens, judgments, easements or other claims that could affect ownership.

Learn more in the knowledge base

Auction Day Bidding Strategy for Foreclosure SalesGuide · 6 min readAuction day is where your research turns into a binding purchase, so preparation and discipline matter more than tactics. This guide covers what to do the night before, how bidding works in person and online, how to stick to your maximum and what to do right after you win or lose.How Foreclosure Auctions Work: A Guide for First-Time BiddersGuide · 8 min readA foreclosure auction is the public sale where a lender's collateral is sold to repay a defaulted loan. Rules on notice, payment, title and redemption are set by state law, and buyers usually pay cash for a home they have never been inside. This guide explains how the process works so you know what you are bidding on.Researching a Foreclosure Property Before the AuctionGuide · 6 min readAt a foreclosure auction you usually buy as-is, unseen and without contingencies, so research done before the sale is your only protection. This guide covers how to confirm the sale details, check title and liens, estimate value and repairs from the outside and turn it all into a maximum bid.
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Disclaimer: The information on this page is for general educational purposes only and is not legal, financial, tax or investment advice. Laws, lending rules and market conditions vary by state and change over time, and any figures shown are estimates. Before you buy, sell, finance or bid on a property, consult a qualified attorney, financial advisor, lender or licensed real estate professional about your situation.