Buy it directly from the owner before judicial foreclosure process starts.
Buy it at auction (public auction or sheriff’s sale).
Buy it from the lender after it becomes the lender’s own property (REO - Real Estate Owned).

The first option is the best if you succeed in making a deal at this stage. The third option is more common. There is a temptation to raise the price unnecessarily during auctions. Also, you may not have a chance to inspect the house for sale at an auction.

Some lenders have their own staff to sell their REOs while others prefer to sell through real estate agents. Your real estate agent will be able to find such properties for you. You can also buy from banks, credit unions and other mortgage lenders directly without having a real estate agent.

Foreclosure buying tip: You take a high risk if you buy a property at auction in a state where the original owner has the “right of redemption.” Try to buy the property before the judicial foreclosure process starts or buy it from lenders as REO to eliminate the risk of redemption.

Is foreclosure homes market regulated?

There is no single law or procedure covering all foreclosures in the United States. Each federal and local government agency applies different rules.

Most foreclosure homes are owned by:

Lenders (banks, credit unions, saving banks, etc.) that financed the purchase of the property
Government agencies that guaranteed or insured the mortgage loans for the property

Why are foreclosure homes below-market rates?

Lenders and government agencies having foreclosure properties want their money back.

They want their money back fast. Faster sale is important à Faster sale means lower prices.
They want to recover their money. Their main concern is to get their money back. They don’t profit from proceeds that exceed what the borrower owes (loan principal + accrued interest + late payment penalties + any other fees). They are not interested in selling at maximum price.
They are not in the real estate business. Every single day they deal with these properties is a waste of their time. Getting rid of these properties is their main concern. à Higher or lower price is not their main concern.

Lenders and government agencies that own foreclosure properties price them low in order to make a quick sale. They are not allowed to make a profit from the sale.

How can you find foreclosure properties?

To find foreclosure opportunities, contact:

County clerk’s office for their listings
Bank lawyers dealing with the sales of their bank’s REOs.

Hidden Foreclosures Market: You might expect that lenders would advertise the properties in their portfolio to get rid of them fast. Unfortunately, this is not the case. Lending institutions don’t like to acknowledge publicly that they had many foreclosed properties.

Prestigious banks and other lenders do not want to list foreclosed properties in newspapers or in other public media. They are ashamed of their bad loans. Advertising these properties publicly would acknowledge their failures.

Listing of agencies and organizations that sell foreclosure properties

REOs = Real Estate Owned by lenders (banks, credit unions, saving banks, and others).
Government-owned properties
HUD
How can you buy a HUD home? Telephone: 1-800-767-4483
HUD Homes for Sale
HUD Homes for Sale by State
Multifamily Sales
Foreclosure properties by email (free subscription) and find properties by location:
- Foreclosures by eBay
- First Preston
Department of Veterans Administration (VA)
Federal national Mortgage Insurance Association (Fannie Mae – FNMA)
Freddie Mac
Internal Revenue Service (IRS)
Buying Assets (Real Estate Sales) by Federal Deposit Insurance Corporation (FDIC)
Special Sales (Real Estate) by Federal Deposit Insurance Corporation (FDIC)
Sheriff’s Office (check your local sheriff’s office sales with keywords). Here’s an example:
- Montgomery County Sheriff’s Office
General Services Administration (GSA)
Small Business Administration (SBA)
U.S. Marshals Service (USMS)
U.S. Customs (U.S. Department of the Treasury)
U.S. Army Corps of Engineers
U.S. Department of Agriculture Rural Development
U.S. Postal Service
Small Business Administration (SBA)
Private Firms (eBay and others)