Penny auction (foreclosure) facts for kids

A penny auction was a special way people helped each other during tough times. Imagine a family who couldn't pay their farm loan. The bank would then try to sell their farm at an auction.

During a penny auction, neighbors and friends would gather. They would agree to bid only very small amounts, like a few pennies. This made sure the farm sold for a super low price. After buying it for almost nothing, they would give the farm right back to the original family. This helped many families keep their homes and farms.

How Penny Auctions Helped Farmers

Why Farms Were Sold

During the Great Depression in the United States, many people lost their jobs and money. Farmers especially struggled to sell their crops. This meant they couldn't pay back the money they borrowed from banks to run their farms. When farmers couldn't pay, the bank would take over the farm. This process is called foreclosure. The bank would then try to sell the farm to get its money back.

How Neighbors Teamed Up

When a farm was put up for auction, the local community would come together. They wanted to help their neighbor keep their home. They would all show up at the auction. Their plan was to make sure no one else could buy the farm for a fair price.

They would bid only a few pennies. If someone tried to bid more, the group would make it clear they didn't want that to happen. This usually meant other bidders would back off. Because of this, the bank had to sell the farm for a tiny amount.

Giving the Farm Back

After the farm was bought for pennies, the neighbors would immediately return it to the original farmer. This was a powerful way for communities to support each other. It showed how people could work together to protect their friends and families from losing everything. This act of kindness helped many families stay on their land during a very difficult time in history.