Steps to Buying a Foreclosed Home

Buying foreclosed homes involves steps such as researching properties, securing financing, attending auctions, conducting due diligence, and completing the purchase, with detailed guides available from sources like RealtyTrac and state-specific guides for regions like California.

Step 1: Find a Property

Begin by creating an account with any of RealtyTrac, Foreclosure.com, Auction.com and decide where you want to search for properties.

Step 2: Get Financing

Securing financing provides an estimate of what you can afford and enables you to act quickly once you find a property of interest. When you approach a borrower/owner or a foreclosing lender, secured financing demonstrates that you are a serious buyer ready to purchase promptly.

Step 3: Contact an Agent

If you are a first-time homebuyer, especially one unfamiliar with purchasing foreclosed properties, contact a local real estate agent experienced in foreclosures. Ensure the agent understands your priorities and has relevant experience. An experienced agent is an indispensable resource.

Step 4: Contact the Owner

Depending on the property’s status, the seller could be the owner in default, the trustee or sheriff, or the foreclosing lender; the bargain-and-risk profile of each stage is laid out above. Whatever the stage, verify the status before you spend money. For pre-foreclosure and auction properties, contact the trustee or attorney listed on the filing — they have the current word on whether the loan was reinstated or the sale postponed, and auctions are postponed or canceled at any time, so re-verify close to the date. For bank-owned homes, contact the lender’s REO or asset-management department to arrange a viewing and make an offer. In every case, check for additional loans and liens before you price your bid.

Step 5: Make an Offer

If you have never purchased a foreclosed home, enlist a real estate agent to help prepare and make an offer. Use the RealtyTrac Agent Network to find a local agent.

Estimate the Bargain

Check the property’s estimated value. Focus on properties where the equity (estimated market value minus outstanding loan balance) is positive. This ensures instant equity if you buy the property for the outstanding loan balance.

Pre-Foreclosure or Bank-Owned Offers

Prepare an offer similar to a typical purchase offer, contingent on a full inspection and title search.

Auction Offers

Make your bid at the auction, often requiring payment in cash via cashier’s check. Conduct thorough research beforehand, as full inspections and title searches are usually not possible.