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How Do Foreclosed Homes Work

How To Find Foreclosure Properties

How Does Foreclosure Work in Real Estate?

To see pre-foreclosure and foreclosed properties on Zillow, enter your search area, click Filter, and then click the Pre-Market category. Or you can check Zillows Agent Finder to find agents who have experience with foreclosures open the Advanced menu under Service Needed and click Foreclosures in the list of Specialties. Your agent will guide you to foreclosure property listings on the Multiple Listing Service , a real estate professionals-only database.

Other sources of distressed property information include newspaper legal notices, bank websites, and government websites such as the Federal Housing Administration. Beware of ad-based, subscription websites because which may include inaccurate or outdated listings.

Find Foreclosures For Sale

Although your real estate agent will likely be able to help you search for foreclosures, you may want to investigate for yourself as well. The internet has made it much easier than it used to be to find foreclosures in your area and in other parts of the U.S. There are now multiple different areas of the web where you can search. Here are three we especially recommend:

  • Rocket Homes: This online repository for real estate listings will even tell you what type of foreclosure you are dealing with.
  • HUD: This official government website lists foreclosed homes. There will be a real estate agent listed whom your own agent can contact.
  • Fannie Mae HomePath®: Here you will be able to search for foreclosure listings by address, ZIP code or MLS number.
  • Freddie Mac HomeSteps®: This is Freddie Macs answer to the Fannie Mae foreclosure site, with very similar functionality.

Things To Know Before Buying A Foreclosure Listing

Theres a lot to consider when buying a home, especially a foreclosed home. Keep these items in mind when you enter the market and start shopping for a foreclosure:

  • Sold as-is. When buying a foreclosed home, what you see is what you get.
  • Firm sale price. The bank has a firm debt to be recovered and cant go any lower than the asking price. So, youll want to understand that you cant negotiate the sale price.
  • Required preapproval letter. Before purchasing, youll be required to have a preapproval letter from a mortgage lender for the selling bank to consider your offer. Take a look at our mortgage and home loans primer for important details on how the process works.
  • One real estate agent. To cut down on commission costs, almost all foreclosures are brokered by a single real estate agent wholl represent both you and the seller.

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Get The Home Appraised If You Plan To Finance It

Whenever a lender loans someone money to buy a property, they want assurances that their money is being invested wisely. That’s why they usually require a formal appraisal to determine the property’s fair market value.

» MORE: Find out what appraisals are and if you need one

If the appraisal comes in low, you’ll need to come out of pocket for the difference. For example, if you offer $250,000 for a Pennsylvania home and it appraises at $240,000, then the lender will only finance $240,000. You’ll need to cover theremaining $10,000 or renegotiate the sale price.

What Is A Foreclosed Home

Foreclosures just tiny part of area real estate picture, real estate ...

A foreclosure is the legal process where the lender attempts to recover the balance of a loan from a borrower whos stopped making payments on the home. The lender then puts the home up for sale because the home itself can be used as collateral to pay back the debt.

If youve bought a home previously through a conventional purchase, youll find a few differences in this process . Youre going to be dealing directly with the bank that owns the property, and theyre likely fielding multiple offers soon after the home has gone on the market.

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A Few Words Of Caution

Distressed properties are generally sold as-is, as in what you see is what you get. There are no warranties so make sure a certified inspector looks over the property before you make an offer. You need to know how much it will cost to make the place habitable or flippable.

Lenders typically clear the title before listing a foreclosure, but its wise to hire a title company to research and cure title problems before closing on the property.

Its also a good idea to have your financing lined up before making a bid. But even if you offer cash, dont expect a deal on a bank-owned property to proceed quickly. Multiple pairs of eyes must review the deal and respond to your offer. It could take weeks, so be patient.

For more details about buying foreclosed properties, check the Foreclosure Buyers Guide in Zillows Foreclosure Center.


Foreclosure Process Step : Auction

The home will be sold at a public auction to the highest bidder, who will have to pay the full amount of the bid immediately. This buyer will receive a trustees deed once the sale is complete, at which point he becomes the official owner.

From there, the homes new owner must serve any remaining occupant of the home with a three-day written notice to quit .

If the occupant does not move out in the three days, the bidder must go through the formal eviction process in court in order to get possession of the home, Zuetel notes.

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What To Know About Purchasing A Foreclosed Home

Few things in life are more exciting than owning your own home. And if youre on the house hunt, youve probably found that foreclosed homes can be quite affordable.

Unlike a standard real estate purchase, buying a foreclosure requires a different purchasing process. So before you pursue buying a foreclosure, consider these tips to land that home of your dreams.

Receive A Home Inspection

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When youre buying a foreclosed home, youre buying it as is, so its particularly important to hire a certified home inspector to inspect the property. Otherwise, you might be facing more costs in repairs than anticipated. You may be able to ask the bank to inspect the property beforehand, though in some cases it may not happen, considering there may be other buyers who want to forego this step.

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Foreclosed Home Purchase Tips

Be on the lookout for foreclosures that linger on the open market because, very often, deal-breaking issues are lurking. Its likely that the home may require significant repairs, or that liens are levied against the home that outweigh the homes value. Also, if the home wasnt winterized the significant costs required to repair that damage have likely deterred other buyers from taking the leap.

The Bank Pays Commission

With the lenders and banks having to sell the property, they are in charge of the sellers costs. This also includes auction costs and real estate agent commissions, making buying a foreclosed home much more attractive. You will have fewer costs to deal with and can focus purely on purchasing the property, rather than the other expenses.

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Stage : Foreclosure Auction

If the owner cant manage to hang on to the property, it will probably go up for sale in a foreclosure auction next. Successful bidders usually have to pay in cash at the time of purchase, and theres not much time or opportunity to research the property beforehand.

A foreclosure auction offers some tempting bargains but the buyer assumes all risk of anything going wrong with the title, condition or any other aspect of the property. Its a big bet to make, and not for the faint of heart. Read more about buying at a foreclosure auction.

How To Buy A Foreclosed Home In 5 Steps

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The process for buying a foreclosed home can be summed up in an easy five-step process, as outlined below. This is the same process as buying a home that hasnt been foreclosed on with a few small changes. For one, youll likely be working directly with a bank or mortgage lender that now owns the property and they could be much less responsive than an individual selling their home. Also, the way you find foreclosed homes can be different than your traditional housing search.

The five steps for buying a foreclosed home are:

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Sellers May Not Be Cooperative

Though it may seem logical that a bank or a government agency will want to unload a property quickly and cleanly, this is usually not the case. The bank or the agency stands to lose money on the sale, and will hold out for the best offer they can get. For that reason, the process may drag out a lot longer than you planned.

Get Your Financing In Order

Before you start looking to buy a foreclosure at foreclosure auctions or through REO listings, its important to make sure you can get a mortgage. Buying with cash is the surest way to secure a property, but thats not an option for most homebuyers. If youre planning on using a loan to buy a foreclosure, youll want to prequalify and gain preapproval before you start looking. This is because youll have to show proof of funds before your offer is accepted, most of the time when buying a foreclosed property. They wont wait around for you to go get financing.

Preapproval will give you your mortgage rates and terms before you put an offer in. While you may think that getting a mortgage through the bank selling the property is your only choice, its not. The lender treats the foreclosure and new loan as completely separate transactions, and they are. As a result, its not easier or even advantageous to use the same bank, unless the rates and terms make sense for you. Finding the perfect mortgage lender doesnt have to be hard.

If youre planning on making a cash offer to buy a home, instead, then youll need to get your funds together and make sure they are ready to move when the owner of the home approves your bid. Youll have to move quickly once that happens.

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And If Youre The Winner

Be ready for things to move fast. With, for example, the contracting department will contact you within two hours and walk you through the online purchase and sale agreement, which shows the total purchase price and the timeline for submitting documents and payments. Make sure that escrow receives your documents and payments on time otherwise, you could lose your earnest money deposit.

Look closely at the property page for each property you are planning to bid on. Many properties have whats called a buyers premium, which is the fee charged by the auction company for conducting the sale, from marketing through the closing. The amount can vary, but its usually 5% of the winning bid amount. Many properties dont have a buyers premium because the bank or seller has arranged to pay this fee out of their proceeds from the sale.

First Things First: Foreclosed Homes Are Sold As

How To Find And Buy A Foreclosed Home

As much as we might like it to be true, theres no such thing as having your cake and eating it too. Buying a foreclosed home is no exception, as theyre nearly always sold on an as-is basis.

What that means in practice is that what you see is what you get. Buyers of foreclosed homes can still conduct an inspection, but the sellerusually a bank or local governmentisnt obligated to make repairs, nor will the sales price be discounted to compensate you for repairs or improvements that need to be made.

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Get A Home Inspection

Once again, keep in mind that youre buying a foreclosed home as-is. This means no one on the selling side is going to pay for any needed repairs. These repairs are your responsibility.

Because of that, its very important that you inspect the property as part of your offer process. And if the home inspection uncovers too many problems or problems that cost too much to fix, you might want to pass on buying the home.

Banks or government agencies will usually allow for an inspection contingency as part of an offer. This means you have the opportunity to order a home inspection after your offer is accepted but before the sale closes. Your home inspector will tour the residence looking for everything from leaks in the roof to evidence of a shifting foundation.

After the inspection, youll receive a written report detailing the inspectors findings. Youre able to walk away from the sale if there are too many problems. Foreclosed homes tend to offer little to no room for negotiation no matter what the inspection reveals.

Again, expect to spend more money on repairs for a foreclosed home. To get a better sense for the houses current state, find out how long its been unoccupied and determine if the previous homeowner performed routine maintenance on the home.

Its also a good idea to check with your local building department to find out if there are any open building permits that could present issues post-closing.

Buying A Foreclosure Home At Auction: The Basics

If youre interested in buying real estate as an investment, the local multiple listing service isnt your only option. Real estate auctions are growing in popularity. Experienced investors often buy property this way, but technology has simplified the process and has made it less intimidating to new investorsas long as you do your homework and use free tools from to find homes close to you.

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How Does Buying A Foreclosed Home Work In Pennsylvania

There are three main stages to foreclosure in Pennsylvania: pre-foreclosure, foreclosure auctions, and real estate owned foreclosures.

Buying pre-foreclosures or REOs is a lot like buying conventional homes â you find a property, make a written offer, negotiate terms and price, and then close.

Buying foreclosures at auctions requires registering with the trustee, attending the auction, bidding on a property, and paying for it in cash or certified funds.

How Much The Foreclosed Homeowners Must Pay To Redeem

Save Me from Foreclosure in Ellabell, Georgia

To redeem the property, the foreclosed homeowners would have to pay you the amount you paid at the foreclosure sale, plus all allowable charges such as:

  • the amount of any assessments or taxes
  • reasonable amounts you paid for fire insurance, maintenance, upkeep, and repairs
  • the amount of any prior liens that you paid, and

You can see why redemption is so rare in California. A homeowner who, perhaps no more than a year ago, was unable to keep up on the home’s mortgage payments would have to turn around and come up with not only the purchase price, but additional amounts to cover interest and your expenses.

If the foreclosed homeowners did take steps to redeem, you would probably first learn about it when they request a redemption amount. Once the homeowners pay the redemption amount to the levying officer who conducted the foreclosure sale, the officer will promptly deliver the payment to you. .

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First Order Of Business: Know Market Values

Your entire foreclosure adventure will rise and fall on your knowledge of the market area where youre purchasing the property. The more you know about values in the area, the greater the likelihood of success.

A foreclosed property has two valuesthe purchase price youre likely to buy the house at, and the market value that the finished property is likely to sell for. The difference between the two will determine how much money you should spend on rehabilitating the property, and how much profit you can expect to make on the trade.

There are different ways you can make this determination. A quick method is to use online resources, such as and Both sites provide a high altitude look at the value of a property, or at least the general neighborhood.

Thats a good starting point, but youll have to drill down deeper, eventually. If you plan to make an offer on a foreclosed property, youll have to have a more accurate picture of what the specific completed value is likely to be. The best source for this information is a trusted real estate appraiser. With just the address, an appraiser can determine final market value based on sales of comparable homes in the area.

Where Can You Find Foreclosed Homes

Different places a buyer can find foreclosed property listings in their area include:

  • Real estate agent: A real estate agent can help a buyer find a foreclosed home on the market because of their access to listings and knowledge about local properties in the foreclosure process.
  • Government-owned listings: The Department of Housing and Urban Development lists the foreclosed homes it owns on its websites and through local real estate agents.
  • Bank websites: Bank websites can help a buyer find a foreclosed home on the market because they may list their properties online, such as Fannie Mae.
  • Countys office: Information about foreclosed homes is filed with county offices, making it a public record and accessible to anyone.
  • Tour neighborhoods: You can tour the neighborhoods where youd like to buy and check for real estate signs that may be marked Foreclosure or Bank Repo with an agent’s name on it.

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