Foreclosure Properties

Foreclosure describes property that has been seized by the lender after the owner has defaulted on mortgage payments. For anyone wanting to buy a house, a foreclosure can be enticing because this type of property is often sold at a discount, since the lender would rather get some money back on the investment than lose the entire property. After the lender takes control of a foreclosure property, they’ll try to resell it as quickly as possible in order to recoup losses or at least minimize any losses.

While bargains can certainly be found in the foreclosure niche, care and lots of research needs to be undertaken. For example, if seeking to buy a foreclosure through the auction process, it’s unlikely you’ll be able to enter the house prior to the auction, or benefit from an appraisal or any type of inspection. It’s taking a big risk to buy a house without being able to see what you’re getting. You’ll be buying the house “as is”, meaning the seller is not responsible for any repairs. Yu will be the person responsible for any repairs or renovations later found at the property and this can be very expensive.

However, when buying foreclosures through a lender’s agent, you’ll be able to view the property and ask for an inspection before making an offer.

How To Find Foreclosures

There are a number of ways to find foreclosure property. Note that you will not be dealing directly with the homeowner; instead, it will be with a bank or other lender, or a real estate agent.

Foreclosure Agent – Find a real estate agent who understands the process and is experienced in foreclosures. Some will have a relationship with lenders that have foreclosures on their books. An agent may also know about listings through the government agencies (US Department of Housing and Urban Development, the Department of Agriculture, and the Department of Veterans Affairs).

Bank Auction – A bank may allow a delinquent property to go to auction. Usually happens through a county agent. Be ready to make an all-cash payment.

Direct from Lender – Once properties become bank-owned or real-estate-owned, you can make offers to the lender or bank.

Online Searches – You can conduct your own research online. There are many sites dealing with foreclosures or bankruptcies including the following –

  •   Features HUD Foreclosures. HUD is a foreclosure home where the owner has defaulted on an FHA loan.
  •   Fannie Mae's foreclosure listings service
  •   Freddie Mac's listings service
  • and
  • Banks and Lenders   Their own sites may list foreclosures

Be Ready to Buy

As a prospective buyer of a house or other property, you can search with more confidence if you have pre-approval of your mortgage. This step is even more essential when it comes to targeting foreclosure properties. Foreclosure buyers who can make all-cash offers puts them ahead of other buyers who have yet to secure finance or aren’t sure how much they can borrow. Arm yourself with a pre-approval letter from your bank or lender to back up any offer you make and help close the deal faster.

Pros and Cons of Foreclosures

There are pros and cons to buying foreclosure property. On the plus side, you can likely buy a house more cheaply than almost any other type of property on the market. And if you have the ready cash, the market for foreclosed properties will be much less competitive than the typical housing market.

The downside of foreclosures, however, is that you may have to deal with extra hassles along the way eg the house may be in need of costly repairs, have an outstanding lien, unpaid taxes, or other legal pitfalls.

Another thing to keep in mind when buying foreclosures is that there may be an outstanding lien, unpaid taxes or other legal issues with the property that you will not immediately be aware of. This can include costly repairs. Therefore, it is important to research the property thoroughly before deciding to buy. 

Consider Using an Attorney

While only a small number of states in the USA require real estate transactions to be supervised by a real estate attorney and to be present at the closing, hiring one is worth considering when dealing with the complexities of foreclosures. Their advice and knowledge can prove invaluable, especially to the inexperienced investor.


Foreclosure properties are a great way to buy at big discounts compared to the market but you need to go in with your eyes wide open. If you’re a first-time home buyer, it is recommended you engage the services of a real estate agent experienced in foreclosures, plus a real estate attorney.