When buying a forclosure at auction what happens to the unpaid balance?

Depends on the state. In a non-recourse state the bank eats it. In a recourse state, the bank can sue the previous owner for the difference.

Also, if the previous owner had PMI insurance, the bank would make a claim against PMI assuming it was a 3rd party, not self insured.

You can find out if the property has liens on it by doing a title search against it. If you are lucky you can do this search online. If not, go to the county clerks office and someone there may be able to help you.

As far as the mortgage being more than will be bid at auction (primary mortgage, that is), many I have been to the bank will open with a bid of at least the principle owed them. If no one is willing to bid more, they take it and give it to their REO/assets department to try and sell. If you were previously trying to short sell with them and had no luck, you can try working with this new department with possibly a little more leverage (obviously no one else wanted it at that price). Good luck

If you are truly interested in buying an auction property, go once before you are actually interested in a specific property. This will help you get the feel and see what the process is before you walk in with a a check. Some people get nervous at auctions and knowing sort of what to expect can help you from making a huge mistake. If there are liens on the property you will not be able to obtain financing, so unless you are buying all cash, do a title search. If you are really interested, having a real estate attorney help you out might not be a bad decision.

Submitted an offer thru my realtor for one that is being foreclosed upon for 25k less than asking so we will see what happens.

Thanks for the answers.

the offer you are submitting is for a short sale?

Be careful. NEVER buy a house sight unseen through a foreclosure, even IF it seems like a "can't beat" deal via the listing. MANY people that get foreclosed on, take out their frustration on the bank and "the man" by stripping everything out of the place, and selling it. Then they may go around and start kicking holes in the walls and such. I even saw one house where they went into the crawlspace and removed pillars, and the house sagged enough to break it's back. The bank STILL ended up selling that house for $15k. Even fixed up though, that particular house will NEVER be worth more than $75k max.

So, you may have to replace nearly everything, furnace, air, hot water tank, etc, etc, etc.

EVERY foreclosure house I have ever inspected in Michigan has been stripped to a greater or lesser degree. That doesn't mean it might not still be a killer deal, but you MUST do your "due dilligence" and make very sure of that. The BANK will NOT warn you, or tell you anything about it, even if they KNOW it's gutted. They expect you to be a "wise investor" and you will sign papers saying you have NO recourse to them even if you find something after purchase that is a serious defect, or whatever that they should have known about.

thanks

be careful of property with 2 or 3 liens as i was told you could just be bidding on 1 lien and not get the property at all.

I haven't had too much trouble with a property having multiple liens. Occasionally you will see a foreclosure by a secondary lien holder (say a HELOC or other some such) and in these cases the primary lien will still be intact on the property. That property you thought was such a steal at 10k may just come attached with 100k mortgage :S