Foreclosed properties present a unique opportunity for investors and homebuyers alike. We’ve talked about it before, but the biggest reason anyone should strongly consider buying a foreclosure is the access some of them can provide to immediate equity. Think about it: normally it takes years to pay down your mortgage enough before you can cancel mortgage insurance (assuming you used a conventional loan). Buy the right foreclosure and it’s possible your LTV may be good enough that you never even need mortgage insurance. That’s monthly savings right there, and thousands of dollars in savings over the life of the loan.

Next, consider home equity loan products. Home equity loans, home equity lines of credit, and cash out refinances could be there for the taking just a few months after closing. Use any capital obtained to pay off debt, finance a small business venture, or remodel the foreclosure before flipping it (our favorite is as a down payment for an investment property). The key is to use the money to better your financial position.

If you’ve been long convinced that foreclosures are a smart investment, your next question may be where to find the best deals.

Fair enough. Let’s get into it.    

Online Foreclosure Listings:

The internet has revolutionized the process of finding foreclosed properties, offering a plethora of online platforms dedicated to listing such properties. Websites like RealtyTrac, Zillow, and Foreclosure.com collect foreclosure listings from across the country. These platforms often offer advanced search filters, which help narrow down properties by type, price range, and geographical area.

Real Estate Auctions:

Public auctions conducted by banks, government agencies, or auction houses take place these days both online or in person. As you probably expect, homes are sold to the highest bidder. 

To find an auction, you’ll obviously want to do a search for real estate auctions in your area. When you do, you may see the phrase ‘trustee sales’ or ‘trustee auction’ which are just different ways of saying foreclosure auctions. 

Real Estate Agents and Brokers:

Real estate professionals often have access to exclusive listings via their own listing service. If you don’t have an agent yet,  ask about their experience with foreclosures before signing any contract. You want someone who has experience negotiating with banks. If you have signed a contract, it’s not essential for your agent to have extensive experience in order for you to successfully buy a foreclosure, but it does help. 

FYI: Real estate agent contracts typically last between 3-6 months.

Government-Owned Foreclosures:

Government-owned foreclosures, including properties owned by agencies such as the Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA), and Fannie Mae, represent another avenue for prospective buyers. These entities acquire properties through foreclosure proceedings and often offer them for sale at discounted prices. HUD Homes, for instance, are sold through HUD-approved real estate brokers, with priority given to owner-occupants before investors.

Local Courthouse Records:

If you’re willing to invest the necessary time and effort, scouring local courthouse records may give you some insights into foreclosure opportunities within your area. 

Courthouse records typically contain information about properties undergoing foreclosure proceedings, including notices of default, lis pendens filings, and auction schedules. This approach can uncover hidden gems that may not yet be available through other avenues.

Networking and Word of Mouth:

Networking within the real estate community and establishing connections with industry professionals can be instrumental in uncovering foreclosure opportunities. Attending real estate networking events, joining investment clubs, and connecting with property managers, lenders, and foreclosure attorneys can provide access to insider information and off-market deals. Additionally, spreading the word among friends, family, and colleagues may lead to referrals or insights about distressed properties in desirable locations.

Conclusion

Approach any foreclosure endeavor with due diligence. While it’s possible to get a mortgage for a foreclosure bought at an auction, it’s not easy. Make sure you have a lender lined up, and that you have the green light before you participate in an auction. You’re best bet is to find a foreclosure that banks are willing to list on regular MLS platforms, such as Zillow or foreclosure.com.