The thought of buying a foreclosed home to save money should pique anyone’s interest— especially if you’re considering moving to Hilton Head, South Carolina. However, Hilton Head foreclosures have a bit of a learning curve to them, so we suggest doing a little bit of research  before you start running. 

In case you don’t know, there isn’t just one type of foreclosure. In fact, there are a few different types. We say this because, if you want to use a mortgage to purchase a foreclosure, some are easier to pursue than others. 

Below, we talk about the foreclosure process in South Carolina, how to find a foreclosure in Hilton Head, as well as the overall pros and cons of buying foreclosures. 

While finding affordable housing in South Carolina can be difficult, if you know what you’re doing, you can find some great deals, especially in the foreclosure market.

What is a foreclosure?

Foreclosure is a legal process where a lender attempts to recover an outstanding mortgage debt by selling the property that served as collateral for the loan. Foreclosures occur when a homeowner fails to make monthly mortgage payments, which often results in the forced sale of the property.

In South Carolina, banks must first put homes up for sale at a public auction. If it fails to sell at an auction, it is then listed publicly and considered an REO property (aka real estate owned, which means the lender officially owns it). An REO property can be bought with a typical mortgage, which includes conventional, FHA, VA, and USDA loans, but homes bought at auctions must usually be purchased with all cash.Thankfully, Hilton Head foreclosures come in a variety of forms. 

How does the South Carolina foreclosure process work?

The foreclosure process in South Carolina is the same as it is in most states. However, the overall foreclosure process is more complicated than most people realize. If you’re considering looking at Hilton Head Island foreclosures, here’s how the process breaks down: 

Phase 1—Notice of Default: Before initiating foreclosure proceedings, the lender must provide the original borrower with a notice of default, which officially warns them that they are behind on their monthly mortgage obligations and are in danger of losing the property. Typically, the foreclosure process begins after the homeowner has missed three payments, but it depends on the mortgage agreement. 

Phase 2—Judicial Foreclosure Process: South Carolina follows a judicial foreclosure process, meaning foreclosures must be handled through the court system before any legal action can take place. Therefore, the lender must first file a lawsuit in court to foreclose on a property where the homeowner has missed multiple payments. Legally, the lender can neither evict a homeowner or take ownership of a property without first going through the judicial process.

Phase 3— Foreclosure Dispute: After the lender files a foreclosure lawsuit, there is a period where the borrower can respond to the lawsuit and potentially contest the foreclosure. If it is not contested, the property then goes to a public auction. When you first start looking, you’ll probably notice that many Hilton Head foreclosures are about to appear on a public auction.

Phase 4— Notice of Sale: Prior to the foreclosure sale, the lender must provide notice of the sale to the borrower and other interested parties. This notice is typically published in local newspapers and posted at the courthouse. 

Phase 5—Public Auction: Once the dispute period has passed, the property is listed at a public auction. Auctions are usually conducted by the county's Master-in-Equity or a court-appointed trustee.

Phase 6— Right of Redemption: South Carolina allows a right of redemption, which gives the borrower a limited period of time after the foreclosure sale to redeem the property by paying off the outstanding debt plus any additional costs. Therefore, even if you buy a foreclosure at an auction, there is a period of time in which you’ll have to wait before you can officially claim the property.

Phase 7— Deficiency Judgments: In some cases, if the proceeds from the foreclosure sale are insufficient to cover the outstanding debt, the lender may pursue a deficiency judgment against the borrower for the remaining balance.

Phase 8— Eviction Process: If the foreclosed property is occupied by the borrower or tenants, the new owner must go through the legal eviction process to take possession of the property.

Phase 9— REO: Homes that fail to sell at a public auction become REO properties. Lenders may choose to put the home through another auction, or they may list it on the open market. 

As discussed, if a home fails to sell at an auction, it then becomes an REO (real estate owned) property. An REO property is officially owned by the lender and can be listed for sale on the open market, which makes it a bit easier to buy for the average homebuyer. When you’re first starting out, we suggest starting with these types of Hilton Head foreclosures. 

If you need to use a mortgage to buy a Hilton Head foreclosure, your best bet may be an REO property. While there are lenders who allow their loans to be used at auctions, there aren’t many. 

What types of Hilton Head real foreclosures are there? 

The market is always shifting, so all of the following may or may not be found at any one point. Nevertheless, here’s a quick overview of the types of properties you may come across during your search for Hilton Head foreclosures:

1. Pre-Foreclosure Properties: Foreclosures in Hilton Head Island SC first start off as pre-foreclosures. A home in pre-foreclosure is a home where the owner has defaulted on mortgage payments but foreclosure proceedings have not yet been completed, often available for sale before the foreclosure auction.

2. Auction Properties: Homes sold at public foreclosure auctions. These homes are typically conducted by the county's Master-in-Equity or a court-appointed trustee. For these types of purchases, buyers typically place bids, and the winning bid usually requires a winning bid fee. Unfortunately, winning bid fees usually cannot be financed into the loan. 

3. Real Estate Owned (REO) Properties: Homes that have reverted to the ownership of the lender after failing to sell at auction, often listed for sale on the open market by the lender or its designated agent.

4. Short Sale Properties: Homes sold for less than the amount owed on the mortgage, with lender approval, to avoid foreclosure and minimize losses for both the borrower and the lender. However, short sales are not technically a type of foreclosure, but you are likely to find them if your search is focused on foreclosures.

5. Government-Owned Properties: Homes acquired by government agencies, such as HUD (U.S. Department of Housing and Urban Development), are often available for sale to the public. 

Tips for buying a foreclosure in Hilton Head SC

Your strategy for buying Hilton Head foreclosures should vary depending on the type of foreclosure you’re looking at. Here are some tips to keep in mind:

Pre-foreclosures:

1. Pre-foreclosures aren’t for sale yet. You’ll want to be working with an agent who can communicate with the current homeowner on your behalf. 

2. The homeowner’s lender has to approve of the purchase price. If your offer is significantly under what the lender hopes to receive at an auction, they may reject your offer. 

3. Time is of the essence. Pre-foreclosures only have a certain amount of time before they are due to be sold at a public auction. If you want to make an offer, prompt communication with the current homeowner/lender is a necessity.  

Auction-foreclosures:

1. Homes bought at an auction require, more often than not, 100% cash. Investors often come armed with stacks of cash, which definitely makes it tough for regular buyers relying on mortgages to compete. It’s possible to secure a loan, but it’s complicated and more difficult.

2. Finding an auction house that allows financing may be easier than finding a lender that is willing to finance a foreclosure. However, once you find an auction house that allows financing, they may be able to point you towards a lender they often work with. Foreclosures in Hilton Head SC will require some sleuthing! 

3. Auction houses often require large deposits. 20-30% of the purchase price is the average amount. Even if you plan on financing the purchase, you will likely still need to come up with the deposit amount.

4. Auction houses often require full payment within 7 days. If you are unable to provide full payment within the allotted time, you are likely to lose your deposit.

5. There is often a winning bid fee. The fee is often 10% or more of the purchase price and usually cannot be financed into a mortgage. It must be paid separately. 

REOs:

1. Keep a keen eye on the market. You're not alone in this game. Seasoned investors and other buyers are likely eyeing the same types of properties, so stay informed about what’s currently on the market, and how quickly things are selling. If foreclosures in Hilton Head Island SC are your main goal, and you notice houses aren’t up online for very long, then you know you need to jump when they pop up. 

2. Don't expect a turnkey property. Many REO foreclosures need a bit of TLC. Decide if you're up for tackling repairs long before you make an offer. 

How to find foreclosures in Hilton Head SC

Finding where to buy a foreclosure can be difficult, but online auction websites can be a goldmine for information. Sites like Auction.com list foreclosed properties that are currently up for grabs. Just a few clicks, and you could find some perfect Hilton Head foreclosures.

Another hotspot is real estate listing platforms. Keep your eyes peeled on websites like Foreclosure.com, which is probably your best bet. Foreclosure.com allows you to filter by the type of foreclosure you’re looking for (pre-foreclosure, auction, and REO). If you just want to focus on a specific tuype, you can easily filter out properties that don’t meet your criteria.

Another option is to reach out to local real estate agents who specialize in distressed properties. They often have the inside scoop on upcoming foreclosures before they hit the market.

And let's not forget about public records. County courthouse websites typically publish foreclosure notices and auction schedules. It might take a bit of sleuthing, but it's worth checking out if you're serious about scoring a foreclosure deal in a very specific area.

So, where should you start? It depends on your preferences and how deep you want to dive. Each option has its perks, so why not try a bit of everything? 

How to get a list of foreclosures from the courthouse in person:

To acquire a list of Hilton Head foreclosures from the courthouse in South Carolina, you'll need to go to Beaufort’s County Clerk of Court. Once there, you’ll want to:

1. Locate the Records Department or Clerk's Office: Within the courthouse, find the records department or clerk's office. Foreclosure records are typically maintained there.

2. Request Access to Foreclosure Records: Inquire about accessing foreclosure records. Provide specific details such as the timeframe and type of records you're interested in.

3. Complete Any Necessary Forms or Paperwork: You may need to fill out forms or paperwork to request access to foreclosure records. 

4. Pay Any Associated Fees: There may be fees associated with accessing foreclosure records. 

How to do it online:

You can technically access the public records online, but the process isn’t very user friendly. Beaufort County’s Clerk of Court lists out how to view foreclosures on its ‘Foreclosure List Information’ page. Here are some screenshots of what you can expect to find:  

As you can see, you’re likely to have a much more ‘user-friendly’ experience using another system, such as foreclosure.com. Foreclosure.com allows you to set maximum and minimum price parameters, as well as bathroom, bedroom, and land requirements.You can even specify by the type of foreclosure you’re looking for. Hilton Head foreclosures can be a competitive space, so you’ll want to use every tool you have to give you an advantage.

Pros and Cons of Buying Foreclosures

Pros: 

• Home will likely sell for less than its appraised value

• You will likely receive immediate equity after closing

• Foreclosures can be found across the country in almost every location and pricing tier

• When the home is sold, you are more likely to make a greater profit

• Immediate equity can be accessed through a variety of home mortgage loans, such as a home equity loans, home equity lines of credit, and a cash-out refinances

Cons:

• May have to pay all cash if the home is purchased at an auction

• Lenders that allow borrowers to use a loan amount at an auction are difficult to find

• Home may need work due to neglect

• Homes bought at an auction require blind bids— meaning you probably won’t be able to do a walkthrough prior to bidding

• Homes bought at an auction require a winning-bidder’s fee that usually cannot be financed into the loan amount

Conclusion

Hilton Head foreclosures can be found a few different ways, but the easiest is probably through an online MLS that specializes in foreclosures (such as foreclosure.com). 

If this is your first foray into the world of real estate, consider taking a look at our Homebuyer’s Workbook, which is an online PDF printable on sale for only $9.99. We cover a variety of topics in it, including buying foreclosures, finding down payment assistance programs in your area, as well as bidding strategies for both types of markets (buyer’s vs seller’s). Here’s a quick look at the table of contents.

If you don’t find any decent Hilton Head island foreclosures, try simply augmenting your search a tad if you’re willing to expand your purchase area. For example, affordable housing in Charleston SC may get you some strong results, or you may simply try foreclosures in Beaufort SC. 

FAQ

Can you buy a foreclosure with a USDA loan?

Yes, you can buy a foreclosure with a USDA loan, but there are a few things you may need to know before you get started. Time is the biggest variable you have to consider, which we go into. 

Can you buy a foreclosure with an FHA loan?

You can buy a foreclosure with an FHA loan, but you may encounter issues if you try to use an FHA loan at an auction house. Certain types of Hilton Head foreclosures are easier to buy than others with an FHA loan. 

Can you buy a foreclosure with a VA loan?

Absolutely! You can buy a foreclosure with a VA loan, but like FHA and USDA loans, certain types of foreclosures are easier to buy with a VA loan than others.

Should I buy a foreclosure for my first home? 

Whether a foreclosure for your first home is a good idea or not depends on a variety of factors. Our favorite thing about buying foreclosures is the potential for immediate, useable equity, which most lenders will let you access six to 12 months after closing.