The Process for Buying Foreclosed Homes

Today, I’d like to outline the basic process for buying foreclosed homes in your area. Keep in mind that this process varies slightly from state to state, mainly because foreclosure laws vary between states. Generally speaking, however, most people who buy foreclosed homes will go through the following series of events.

The Process of Buying Foreclosures

I’ll break this up into the various steps involved in the process. You might not necessarily have to do all of these steps, depending on your situation. But this is what most people in the process of buying foreclosed properties. Let’s get started.

1. Finding a Foreclosed Home to Buy

This might seem like a no-brainer at first glance. Of course, you have to start the process by finding a home. Easy enough, right? Not so fast. Finding foreclosure homes is not as easy as finding regular homes for sale, because they are typically not advertised in the same ways. On top of that, the foreclosure market can move pretty fast, especially in areas with an active buyer’s market. The reason, of course, is that these homes typically sell for less than market value. So there’s a lot of competition for them in most cities, which means you have to stay on top of the market.

All foreclosure activity is reported through county channels (the county clerk’s office, courthouse, etc.). But making daily or weekly trips to your county building is impractical, not to mention a waste of time. So if you want to do this process the right way, you need to sign up for a foreclosure tracking service. You can do that from the top of this blog.

Sign up for the free trial below, and you’ll see firsthand just how helpful it is:
Get a 7-Day FREE trial with RealtyTrac! Find a foreclosed property now!

It’s also a good idea to decide what status of foreclosure you want to target. This is important, because the process for buying these homes will also vary by the status of the foreclosure process. For example, buying a pre-foreclosure home is much different than buying the same home at an auction, after it has been foreclosed upon. When you use a foreclosure listing service like the one I’ve recommended, you’ll be able to filter your search results by status. This is a huge help during the process of buying foreclosed homes — trust me on this one!

You can review this service for free, right now:
Search our list of nationwide foreclosure listings.

So, your first step in the process of buying foreclosed homes is to find properties you want to buy. And the best way to do that is by using a tracking service such as Realty Trac. Moving along in our guide to the foreclosed home buying process, let’s talk about your financing situation.

2. Get Your Finances Lined Up

When offering advice on the general home buying process (not foreclosures), I always tell people to get pre-approved for a mortgage loan before they start house hunting. This is also a smart idea when buying foreclosed properties, and for several reasons. Remember, the foreclosure market can move pretty fast. These houses are typically priced below market value, so there will be plenty of other folks out there with the same motivation you have. When you make an offer to buy a foreclosed home — whether you’re dealing with the homeowner or the lender — you need to show them that you have financing available.

Realty Trac, the foreclosure listing service I recommended earlier, actually has a financing partners for this very purpose. That service is available to members only, which is another reason you should sign up. Whether you use their financing partners, or a lender of your choosing, the important thing is to have your financing lined up before you start searching foreclosure homes. This is a critical step in the process of buying foreclosed homes, so don’t bypass it.

3. Get Professional Help (an Agent)

If you’re a full-time real estate investor, and you’ve been through the foreclosure buying process before, you can probably skip this step. But for the rest of us, it pays to have professional help from a real estate agent. These days, many agents are intimately familiar with the process of buying foreclosed homes in their particular city or town. They have to be familiar with it, if they want to remain competitive in their industry. After all, foreclosures make up a large percentage of homes for sale in many cities right now (a sign of the times, I’m afraid).

If you want to find an agent who specializes in foreclosure buying — or, at the very least, is familiar with the process — I recommend searching for local real estate blogs. You can do this in one of two ways. You can use Google’s blog search tool to search the phrase “buying foreclosed homes” followed by your city name. Or, you could visit the ActiveRain website and do a similar search there. Active Rain is a big network of real estate bloggers, by the way.

The process of buying foreclosure homes can be a slow one. Having an agent who understands the process can speed things up, to a certain degree. Even a so-called “short” sale can take a long time. This is one of many reasons I recommend hiring a professional to help you through the process.

4. Make an Offer on the Home

Who you contact to make the offer will vary, based on the status of the foreclosure. For example, if you make an offer while the property is in a pre-foreclosure status (owner has defaulted on the loan but has not yet been foreclosed on), then you might actually contact the homeowner to make  your offer. If the home has already been foreclosed upon, and it’s being sold at an auction, then you’ll have to make your offer through a trustee. Additionally, if the home is currently bank-owned, you’ll have to go straight to the bank / lender who owns the property.

This is yet another reason you should (A) sign up for a foreclosure listing service and (B) hire an agent who is familiar with the process. A service like RealtyTrac will actually provide you with contact information, in most cases. This can be a big time-saver.

Understanding the Path to Foreclosed Homes

As I mentioned in the beginning of this lesson, this is a simplified sequence of events. But it does cover the basic steps in the process of buying foreclosed homes in your area. My advice is to build on what you have learned from this article. I also recommend signing up for a foreclosure tracking service, as soon as possible. In addition to providing you with active listings in your area, these services have a variety of tips and tools to help you navigate the process. Good luck!