How do Mortgagee Auctions work?

The bank set a reserve, they have a responsibility to achieve as close as possible to market price after having an independent valuation done. Whilst you can often pick up a bargain, you are unlikely to purchase at 30% off.
If reserve is not reached, the banks will often place the property on the market at a set price.

Having spent many a weekend an Mortgagee Sales Im yet to find one thats a real bargan. They tend to attract all bargan hunters and some times are sold above current market value. The lenders main aim is to recoupe what is owed. However, as mentioned they have a legal obligation to get the max and what is fair market value. If a person owes 100k and cant pay dont think you may buy it for 100k the person can sue the lender for selling there house under market value. A lot of these houses Ive seen are in bad shape due to the owners lack of upkeep some have been trashed. Its a bit sad to see people over comitted, mislead then tipped out. Some of the no doc lenders will have you out in 4 weeks and on the market as fast.

The agent will in most case be told the reserve on the day, if not when the biding stalls. They may neg. a bit if you are the only bidder but not much. Some have been auctioned 2 or 3 times the last time being the best to buy at.

Most Always sold by auction the auction rules apply, no cooling off etc. What you see is what you get. As mentioned if its passed in it will go in the window of the agent at a fixed price. They dont give them away (not yet anyway).

If you intend to buy at a mortgagee sale think about the following:

Get the sect 32 asap then get it to your solicitor.

Have a good look at the place most times the power, gas, water will be off so you cant check if things work. 

Have a cover note ready for insurance from the date you bid. Remember you are buying some poor bastards place that just got kicked out.

Have a set price and stick to it (as some ive seen sell for more than or near to build price).

You may pick up a bargan and you may not, I got sick of going to these sales as I felt they were not a bargan.
Hope Ive helped a bit.
Good luck.
T……………..

What happens if the money owed by the previous owner is more than current market value? LVR of over 100%

Eg:
Mortgage of $780,000
Property currently valued $730,000 to $750,000
Reserve most likely set at $800,000 ($780,000 + $20,000 agents fees)
Property passed in at $740,000.

The bank could then put it up for private sale at $800,000 which is highly unlikely to sell.

At what point, and how, will a bank decide to take a hit on this transaction rather than wait indefinately for $800,000 at private sale?
Is some method used to work out how far they will negotiate???