The principal question will be how aggressively the parents will have to bid in order to win the auction. If they are prepared to pay an amount equal to the unpaid principal balance plus delinquent interest they are likely to carry the day. But if this were the case they probably would have personally refinanced their children's defaulted loan and the foreclosure would never have occurred. In the more likely event that they are not willing to make the lender whole, the lender will purchase the loan at auction and proceed to market the REO property.
If the lender acquires the home at auction it will likely contact the parents to determine whether they wish to acquire the REO as they had expressed interest in it at auction. At that point some price agreeable to the parents could be determined. But the children will have been evicted by this point, so the issue is likely to be essentially moot. On balance, I suggest that the poster vacate his home and rent a new place. Presumably, his parents will be willing to extend him a loan to purchase a new, unencumbered home of equivalent value to his former home at some point in the future. Moving is a pain, but it is likely to cause less stress and acrimony than any other alternative discussed here.
The lender will most likely not bid above fair market value which is most probably less than what would make the lender whole. If he purchased at a price that would make him whole, he would then be faced at selling at the market value which would be less than the price he paid for it and also entail additional fees and carrying costs. Most likely the lender would not bid to fair market value unless he felt that the market represented a case for sudden revival.
Just got home from work so I am trying to get caught up with all of your posts and I thank you for all of them!
My parents do not want to bid, they want to buy it beforehand.
ON a sidenote, I thought people would be coming to take pictures of the inside of the home but nobody has been here.
This house needs a lot of work (painting, carpeting and some minor plumbing work) not to mention there are now termite lines forming on the foundation outside around the house. I know, just what we need.