Important terms to know:
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Foreclosed Property A property that has been taken back by the note holder (also known as the mortgage owner) due to default, usually a bank or other lending institution. |
A foreclosure takes place when a property (most often a home) is seized and put up for sale by a lender, usually a bank or other lending institution. Foreclosures are typically the result of a homeowner being unable to keep up with their mortgage and having to give the property up as collateral for the loan they took on.
Foreclosure properties are typically sold at an in-person auction events on the steps of a county or municipal building, event center, or even at an arena. They are marketed by auction companies and/or by the city both online and in print.
So, if you see a foreclosure property listed online, be sure to look at where the auction is taking place—it’s usually at a specific date, time, and location.
What you need to know about foreclosed properties
If you’re thinking about purchasing a foreclosed property, here are a few things to keep in mind.
Due diligence
We highly recommend doing as much research as you can on a foreclosed property before bidding on it at an auction. Check out our article with additional details on how to conduct your due diligence.
Judicial v. non-judicial
Foreclosure properties are generally lumped into two categories—judicial and non-judicial—and, depending on the state, will have specific laws about each type. As part of your due diligence, be sure to research any laws associated with the foreclosure property you are interested in bidding on.
Cashier’s checks
Foreclosure properties are paid for in-person and typically in cash only via cashier’s checks at the end of an auction. Whoever is running the auction will not offer change, so we suggest bringing multiple checks made out to yourself in multiple denominations that can be combined to cover the full cost of the property. These checks can be endorsed to the entity selling the property in front of the county clerk or bank financier at the auction event.
Cancellations
Foreclosure sales can be canceled any time up until the moment they are supposed to go on sale without prior notice. Be sure to check with the entity running the in-person auction event to learn about any changes to the status of the property you are interested in.
Foreclosed properties can offer significant savings for homebuyers, but savings aren’t all these properties offer. Foreclosures can also be smart options for investors—because they are in-person, there are fewer investors competing for the same property, meaning more opportunities to win a property at auction.
Foreclosure properties also often offer great opportunities for fixing and flipping, renting to tenants, or selling at wholesale. But it’s important to remember that foreclosures aren’t without drawbacks. If you’re considering buying a foreclosure property, make sure you understand the full range of risks and rewards before moving forward.
Quick info on foreclosed homes
| Financing or cash-only: | Cash only |
| Inspection or sight unseen: | Sight unseen |
| Property types: | Residential (single family, multi family, modular, mobile), commercial |
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