Considering buying a foreclosure but don’t really know where to start?
For home buyers, foreclosures are a great opportunity to find a good price on real estate, but finding foreclosures poses challenges and ranges in difficulty depending on what market you are looking in. Additionally, someone purchasing a foreclosure will need to be willing to put in extra work to the property and also have the capital to do so.
What is a foreclosure?
Most homeowners borrow money from a mortgage lender to purchase their homes. When a homeowner fails to pay their monthly payments in the terms agreed upon, a lender may seize the property from the owner and sell it to another buyer to help recover the mortgage balance. This is the basic definition of a foreclosure.
How do you find foreclosures?
Foreclosure real estate agents
Sometimes it makes sense to hire a real estate agent that specializes in foreclosures, however their main specialty is simply that they are able to find foreclosures more easily than other agents. Any real estate should be able to point you in the right direction for finding foreclosures and facilitating the transaction. With that said, it is not necessary to hire a foreclosure real estate agent.
Check Trelora.com or Zillow.com
Trelora’s search website is robust and allows for users to search for foreclosed properties in their area. Simply follow these steps and you’ll be able to find mentions of the word foreclosure in the MLS:
- Go to trelora.com
- Select “Our Listings” in the main navigation
- Select the “More” drop down menu
- Uncheck “Listed By Trelora”
- Type “foreclosure” in the keywords section of the “More” drop down menu
Sometimes larger banks list their inventory of foreclosed properties on their websites. The foreclosures listed on these sites are searchable by state and city and include details about their prices, photos, and sometimes descriptions. Your real estate agent should be able to help you search bank websites for a list of foreclosures.
Additionally, some lenders hire asset management companies to handle their foreclosure listings, so it’s worthwhile to check those websites as well. Two examples of these companies are Premiere Asset Services and Keystone Asset Management.
Below is a list of government agencies that might be useful when searching for foreclosures for sale. Keep in mind that some of these agencies require you to have a real estate license or sometimes a broker license in order to access their data.
- HUD Homes: This site includes a list of foreclosed properties that belong to the U.S. Department of Housing and Urban Development.
- Fannie Mae – Owned Property Search: On this site, you can search for properties that have been foreclosed by Fannie Mae, which is a government established housing corporation.
- HomeSales.gov: These homes are previously owned and are for sale by public auction or other method depending on the property. Anyone can buy a home for sale by the U.S. Government. However, you must work with a licensed real estate agent or broker to put in an offer that will be accepted.
- The Department of the Treasury / IRS / Customs: Under authority of the Internal Revenue Code, the property described here has been seized or acquired for nonpayment of internal revenue taxes and will be sold.
The foreclosure process is long and tedious so it’s necessary that lending companies have numerous legal notices that must be filed with your County Recorder’s Office. The information is public record and available to anyone that needs it. If you visit your county’s office or their website, you can search for records pertaining to Notice of Default, lis pendens (an official notice to the public that a lawsuit involving a claim on a property has been filed) or Notice of Sale. The best part about searching public records is that it’s free and you might find newer properties that haven’t reached online foreclosure websites.
In addition to the methods to finding foreclosures listed above, there are sites that claim to do all that hard work for you; for a fee obviously. Be careful when subscribing to these sites and do your due diligence to make sure these sites are a good fit for your foreclosure search. Sometimes the sites pull in faulty data or are slow to update.
- RealtyTrac: This is a subscription website that gets you access to loan history, auction dates and foreclosure addresses.
- Auction.com: This website is an online marketplace where you can make offers on foreclosures directly to the sellers.
- HomePath: Similar to RealtyTrac, this site allows you to search for foreclosed homes by your area.
- Foreclosure.com: Again, this one is another option if you are looking for a search tool, however, they claim to update their database twice a day whereas some of the other sites only update once a week. This would help you get access to deals faster.
What pieces of information should people be looking for when looking at foreclosure listings?
Finding a foreclosure can be a daunting task, so here are some simple steps to ensure you are getting the most bang for your buck:
As with any real estate transaction, make sure that you take a moment to tour the property as foreclosures can typically be especially distressed. Be sure to pay close attention to detail because all repairs will be up to you. The bank will not be paying for any of the repairs that you may need. Additionally, the bank isn’t required to give you disclosure documents like you would receive from an individual owner in a traditional transaction.
Banks set competitive prices so that they can move their foreclosed inventory. With that said, there is a good chance that there will be multiple offers on the property you are interested in so be prepared to navigate a bidding war. The average foreclosure sees more than ten offers so don’t try and low ball your offer. If the property has been on the market for more than thirty days, you might be able to consider negotiating to get a better deal on the foreclosure.
Other things to consider
You’ll need to remember that most issues that might arise in an inspection are more than likely going to be a cost that you’ll need to absorb. Below are some items that are usually paid for by the home-owner in a standard transaction, but not when buying a foreclosure from a bank.
- Overdue utility bills
- Unpaid HomeOwners Association dues
- Septic inspections
- Re-keying the locks and ordering new garage door openers
- Torn out cabinets
- Holes in the wall
- Plumbing issues
If you are interested in learning more about purchasing a foreclosed home, reach out to an experienced agent. Trelora has handled thousands of transactions across the US, including many foreclosures, and our agents are available to answer your questions. Plus, Trelora’s low fees help you save on transaction costs so you can keep more money available to invest in your new home’s upkeep.