The misfortunes of hundreds of thousands of former homeowners are making auction companies rich as record number of homes are auctioned off to investors and new owners.

Gross revenue from residential real estate auctions have skyrocketed 49 percent over the past six years, an increase of $5.6 billion, largely as a result of trustee sales of foreclosed homes and auctions by lenders.

Companies like REDC, Hudson & Marshall and Realtybid International are organizing online auctions on the Web as well as live ones on the courthouse steps to sell off properties in foreclosure to the highest bidders.

If the owner is unable to sell the property, refinance, or otherwise resolve the problem, the property is taken to auction. These auctions are referred to as trustee sales, or sheriff sales, depending on the state. The process for the auction varies by state, but typically properties are sold as-is, subject to existing loan and liens, and require payment in full and in cash at the time of sale.

Buying a home at auction is not for a neophyte. Buying at auction is very risky because it typically requires the buyer to forego inspections, title insurance, and financing. Properties aren’t actually sold at trustee sale auctions-loans are. This can help clear up excess debt on the property, allowing it be resold at an affordable price point. The flip side is that the buyer is responsible for any loans or liens on the property prior to the loan being taken to auction. For example, delinquent property taxes, which are a lien on the property, are almost always the responsibility of the new owner.

Sometimes the winning bidder is even obligated to evict the prior owner or tenant. Even after their home is bought at a trustee sale, which is held at the end of the foreclosure process, homeowners in some states have opportunities to stop foreclosure and actually keep their homes. It’s easy to make a very expensive mistake at an auction, but buyers who learn the ropes can pick up remarkable bargains.

Lenders get first bid at trustee sales, up to the amount they are owed, since they have the most to lose in the transaction and because they are the beneficiary of any funds received from the sale. If no other bids are made, lenders take possession and must try to sell it themselves, either using a real estate agent or by conducting their own auction. Thus, a single foreclosed property may be put up for auction more than once before it is sold.

Here are some tips from the experts.

1. When several bidders are jockeying for a property, wait until the bids start to die down before making yours. There’s no sense fueling the fire.

2. The first few properties offered often sell for less because most bidders are trying to get a feel for pricing patterns before jumping into the fray.

3. Research multiple homes: Don’t miss those open houses; they typically run from one to three days. Do your homework on a lot of properties.

4. Bring a veteran rehab contractor with you to the open houses to estimate repair costs. Pay special attention to plumbing and mechanical systems.

5. Market research: Find out the recent — no more than the past three months — selling prices on neighboring homes. Sites like REALTOR.com, Cyberhomes and Zillow are easy to use.

All signs point to a seventh record-breaking year for auction sales in 2009. As prices stabilize in many markets, the discounts that savvy buyers can realize at auctions will make the extra effort and risk worth it.