A property is typically auctioned when an outstanding debt on the property (mortgage default) requires the homeowner to come up with money to pay off the mortgage, thus avoiding foreclosure. Usually, this process is done when the foreclosure proceedings are over and the lender, the creditor or the bank already has the property in its possession.

First step to buying a foreclosed home from an auction is to do your homework. Research the house being auctioned and investigate through details. Get the specifics- why did it go to foreclosure, what debts are against it and how much, what are the liens (if there are any), what are the important details surrounding the property (physical structure, damages, size, amenities, etc), what is the estimated value of the house and what is the opening bid. The opening bid usually covers the mortgage default, the liens and all other payments and costs that come along with the property.

Research could be tough though since properties being auctioned are bought "as is" and potential home buyers are not allowed to go inside the house and check the property. They could still find some substantial details though by driving along the property, talking with neighbors or checking into the local title company or the country records for the list of properties that are undergoing foreclosure or have been foreclosed.

Second step, get a good estimate of the actual value of the property. Search for similar properties in the same area and see how much they are worth. Properties situated within 3 miles of the vicinity are the most reliable sources in predicting the value of the property.

Third step is to get financing. In order to place an accepted bid you must have at least $1000 deposit. Some auctions require up to $5000 deposit. However, the remainder of the cost must come from a financier which proof must be submitted within a specified period.

Fourth step is to know your ceiling for bids. Remember that in an auction, the property is open to the investing public, thus anyone who has the money and interest over the property will place a bid. Also, remember that auctions work by agitating the bidders to become excited over the process. The more excited the audience becomes, the likelihood that the prices would be bid up. But don't get carried away by the excitement. Set your limit and stick with it.

Lastly, set your mind to getting the property but don't overlook the fact that somebody else might get it from you. Be prepared to lose from the bidding and prepare a back up plan. If the foreclosure deal is not right for you, you could find other better deals.