How To Buy A Foreclosure: Find Foreclosed Homes Online

by Silicon Valley Blogger on 2009-05-0623

The agony and the ecstasy is what CNN has called it. I call it the ultimate zero sum game. Someone wins while another, unfortunately loses. What else is it but this thing called the foreclosure market.

We’ve discussed the pain and aftermath of foreclosure here in the past. But what we hadn’t yet touched upon is the other side of this situation, the case in which families who just a few years ago thought they could never become homeowners in their lifetime, suddenly finding themselves lucking out with keys in hand and a new roof over their heads. It’s unbelievable to see how homes in some parts of the nation (e.g. California) — that were once selling for $500,000 to $600,000 a pop — have now returned to earth, finally selling for a third of their peak prices. Each foreclosed home is a dreadful loss for anyone who bought at the peak but who now has to give up their property, but each is also a heaven-sent bargain for anyone who could only fantasize at one point, of owning their own place.

For those interested in exploring the possibility of buying such homes, here are a few ideas:

How To Buy A Foreclosure: Find Foreclosed Homes Online

1. Understand the types of foreclosures that are available.
There are many kinds of foreclosed property to choose from. Before you enter the market, it’s good to have some understanding of what it is that you are looking for. According to Smart Money, there are different kinds of foreclosures to choose from:

  • Preforeclosed properties: you can attempt to buy from the owners before they default to their lenders.
  • Auctions: you can try the county courthouse or other auction venues.
  • Bank-owned properties, aka Real Estate Owned (REO): these are available through real estate brokers and various sites.
  • Government Homes: only HUD-approved brokers can bid on these.

Know what your goals for the foreclosure are: are you looking at this as a new home or as an investment (for rental or resale)?

2. Study the foreclosure market using free and familiar real estate sites.
You can check the listings by perusing the more popular sites that are familiar and free, such as Yahoo! Real Estate and AOL Real Estate. These listings can be arranged by list or photo view. From the detailed descriptions, you can find out how much the owner wants, the number of bedrooms and bathrooms, and details like the square footage of the properties. I like the map feature, which lets me see the neighborhoods.

Starting off at one of these sites will give you some idea of what’s available, along with price ranges. You should also compare the foreclosure prices to other nearby homes to see how much of a deal you might find.

Thanks to the ability to customize your searches by date listed, price range, city, and more, you can quickly figure out what appeals to you!

3. Check real estate services that offer a free trial.
If you need more than what the free sites are offering, you may want to consider looking into other foreclosure sites that offer subscriptions. These offer 7 day trial memberships, but please be aware that they could charge an ongoing subscription fee after the free period is over. Some suggestions:

RealtyTrac: This site is partnered with Yahoo! Real Estate to offer you more listings. For more details about a foreclosure on Yahoo! Real Estate, you’ll be directed to register with RealtyTrac for a free trial. Benefits of membership include tax assessment information, access to online auctions, and more.

Bargain Network: For more details about the listings on AOL Real Estate, you’ll be steered towards a 7-day trial offered at Bargain Network. They can assist you with foreclosure law, provide you information on neighborhood demographics, and assist with financing, among other things. With this site, you can search for listings by state or zip code, or decide to sign up for email alerts for the types of listings you want. The article center features interesting write ups on topics that steer you through the buying process. In the event you need a real estate broker, you can search for one here. Like RealtyTrac and Bargain Network, it offers a free 7-day trial.

HomeGain: This is another site offering foreclosure listings. Like with the other sites, you can find a realtor, start looking for listings, or check on home values. I noted though, that some of the listings simply led me to their partner site, RealtyTrac.

4. Check the periodicals and home magazines.
Your local papers can be a great source of foreclosure information. In my neck of the woods, we’ve got magazines and supplements on foreclosures that are available at paper stands located at local businesses. You can go online shopping on Craigslist as well: enter “foreclosure” in their search box and see what the site yields you.

5. Pay a visit to your local realtor, bank or credit union.
For local foreclosures, you can always turn to a trusted real estate agent in your neighborhood. If they can’t supply you with direct listings, they may still be able to point you in the right direction and provide you with the resources you need. The same goes for financial institutions in your area. For instance, one credit union I know of sometimes auctions off vehicles, so it might be fruitful to ask if they also handle foreclosed properties.

Along these lines, you could also try your luck with the law. For example, our local County Sheriff’s Office updates its property list on Thursdays and holds open auctions on Tuesdays. For these events, a buyer needs to bring a cashier’s check for 10% of the bid price the next day; the rest is due on completion of the sale, which takes about three weeks.

6. Know how much work you’re willing to do.
As with any property purchase, you’ll need to ask if the bargain is worth the work it might bring. It’s one thing to buy a new house for a song, but if you have to sink ten times its cost into renovations, then it might not be worth it. You’ll need to set aside some money for fees and any unexpected expenses, too.

7. Consider buying from a bank.
I’ve heard a lot about foreclosure auctions, but going this route may be risky. If you buy a foreclosure this way, before the bank has taken it over, they you’re required to buy it without the benefit of inspections. Plus, homes on auction may have liens on them. It’s preferable to buy foreclosed homes through a bank since it’s less of a risk: bank-owned properties have had their inspections plus you may be able to get financing more easily this way.

8. Have a contractor check the property.
A suggestion from the experts: always have a contractor inspect a property before you make the purchase. Let the contractor tell you how much it’ll take to restore a house and turn it into something livable.

9. Be prepared to haggle.
Sharpen your haggling skills! Many foreclosed homes are valued at market so if you’re looking for a better deal, be prepared to negotiate for a better price. Some tips? Check your bank’s foreclosure inventory — you’ll get more leverage on properties that have been sitting around for a while. Also, for areas inundated with foreclosures, start off with at least 20% below market when you make your first offer.

10. Be patient.
While shopping for foreclosures, it’s best to get your ducks in a row so that your buying experience goes smoothly. This is especially the case because despite the apparent supply of foreclosures, there will be many buyers ready and waiting to compete with you to snatch away these deals. So be prepared with your financing, get pre-approval, have your eye on multiple real estate options and be diligent about following up with your bank, agent or lender.

Finding a foreclosed home can take a bit of dogged research, but it’s worked out very well for many homeowners who have been able to find their dream homes.

Thanks to Millie Kay G. for her contributions to this piece!

Copyright © 2009 The Digerati Life. All Rights Reserved.

{ 23 comments… read them below or add one }

PropertyNow May 7, 2009 at 6:30 am

I think that we here in Australia are heading into somewhat similar territory to the USA, except the degree will be lessened a little because of our banking system being a little more disciplined by design or accident. Still foreclosures will become ever more common in Australia especially when interest rates begin their inevitable hike again.

JEM May 7, 2009 at 11:33 am

My sister in law just bought her first home and it was a foreclosesure. She paid 62,900 for it. 2.5 years ago it sold for 138,900. WOW! She feels like she hit the jackpot for sure.

Todd @ The Personal Finance Playbook May 7, 2009 at 11:55 am

I’m a licensed attorney and I would say that your average investor has no business buying at a foreclosure auction. Buying listed, bank owned properties that have been foreclosed is another thing altogether, but the homes at the auction is stacked against the inexperienced buyer for multiple reasons:

1. Unless you have title insurance on the property or have searched the local records for other liens, liabilities or encumbrances, you don’t know what you’re buying. Perhaps this is a 2nd mortgage being foreclosed. A foreclosure will wipe out any junior lien holders (as long as they’ve been given notice). It will not, however, wipe out any senior liens. You may be buying a home with a superior mortgage or other senior liability. Without this knowledge, you don’t know how much to bid or how much you’ll owe if you win the bid.

2. If you’re buying at a foreclosure auction, you have no right or opportunity to inspect the property. You don’t know the condition of the inside of the property. Often when people are foreclosed on, they trash the place. You have no way of knowing what kind of damage has been done. The basement could be flooded.

3. At the auction, you’re competing against the bank that owns the right to payment. They are in a superior position to have information about the value of the property and the liens against it. Invest in areas where you have an advantage (or an even playing field).

OREOs are bank owned properties and they might be the type of investments you could safely target and may be able to buy at slightly below market value. But unless you have a lot of experience in real estate, I would suggest staying away from the foreclosure auctions.

money blog May 7, 2009 at 12:55 pm

There are some completely free site to look for foreclosed home, aslo they can be seaarched for from individual mortgage lenders sites

Mikael @ RetireRichRoadmap May 7, 2009 at 1:41 pm

Forclosure is one thing but you can also find bargains without it being a foreclosure. Personally I’ve just bought a small rental property at an super cheap price. It’s great to be able to raise cash in tough times as there are true bargains available.

EscapeSomewhere May 8, 2009 at 1:59 am

I think we are going to be seeing a lot more foreclosures in the next few months. Apparently multiple banks have lifted a freeze on foreclosures. So properties that have been behind the last few months should all start hitting the market soon.

If someone is looking at foreclosures I would be more wary. The process in most states has less protections for the buyer. Buying a preforeclosure property can be easier to deal with. You still get a good price and the process is pretty much the same as buying a normal house.

Fortune Hunter May 8, 2009 at 7:10 am

I have heard from more than one of my friends/acquaintances that recessions are where the money is made. It is where you get great deals on stocks and real estate. Honestly this type of buying opportunity has probably not existed in the U.S. since the Great Depression in the 30’s and it may never occur again in our lifetime so if you are looking at buying the first house or a few pieces of property for rentals this is absolute best time to buy.

People who will come out of this mess the best are those that have capital and can buy every good deal they can get their hands on right now while still insuring that they have the cash flow to weather the rest of the recession.

Jerry May 8, 2009 at 9:21 am

The possibility of emerging from this mess in good shape will depend on how wise and how disciplined people are with their resources. Foreclosures are selling for more reasonable prices than I would have ever imagined, and as long as you have an inspection so you can have some insurance that the place is in good shape it would seem like a great idea. However, I agree with the attorney above that while foreclosures may work out for many people, from what I have read the auctions are probably not the place for the average Joe.

TRS May 24, 2009 at 2:34 pm

Todd has some excellent advice. Especially point #3. At the auction, you’re competing against the bank that owns the right to payment. They are in a superior position to have information about the value of the property and the liens against it. Invest in areas where you have an advantage (or an even playing field).

This is what a lot of people do not realize when participating in foreclosure auctions – they aren’t getting the lowest possible price because it’s totally tilted in favor of the bank, bidding for itself, basically against itself.

Jennify May 30, 2009 at 5:53 pm

These are really great tips. There are plenty of great foreclosure deals out there — but it’s always best to know what you’re getting in to before diving in. Thanks for the great post.

Lloyd June 6, 2009 at 3:31 am

Thanks for the great post! Your tips offer great ways to help the foreclosures buyer. We should be careful when buying a foreclosed home, because scams are everywhere, just give your trust to a trustworthy realtor. Looking forward to your next post!

Econohomes June 19, 2009 at 1:53 pm

There is another source for foreclosure properties — wholesalers. Mortgage lenders/servicers, auction houses and even real estate agents have not been able to keep up with the sheer volume of foreclosure properties hitting the market. Moreover, financial investors (aka hedge funds) are aggressively purchasing pools of non-performing mortgages, restructuring and refinancing what they can, and fire selling the foreclosures they inherit with the pools. As a result, 1000s of foreclosure properties are being sold in bulk transactions to wholesale investors. A single hedge fund in the Dallas area is selling 200-400 low-end properties per month to wholesale investors.

Depending on price point and volume, wholesale investors tend to pay 25-75% of the current estimated value of a given property. Exit strategies for these wholesale buyers vary. Some buy, improve and rent. Others, buy, improve and resell. Some buy and resell with seller financing. Others buy in volume and the turn around and resell each property individually. In this last case, the wholesaler is operating a la Walmart. Buy for 40 cents on the dollar and sell it to a retail buyer at a discount (say 80 cents on the dollar).

Forclosed Homes June 21, 2009 at 3:32 pm

Thanks for the very informative advice, i am in search of a forclosed home and have came across a number of home at rock bottom prices. I’ve been offered pefectly good houses at a few hundred dollars. It’s shocking to think that the same houses where on the market at over $80,000 just a year or so ago.

Insurance NJ August 24, 2009 at 1:51 pm

Very informative advice. Great way to get properties for cheap!

Rob September 14, 2009 at 10:28 am

Very valuable and timely information, as I’ve been considering a relocation.

Tosha Loucks September 30, 2009 at 2:59 pm

Great information here. Foreclosure is definitely the way to go when looking to purchase a home. This is very informative and the resources are great.


Steve Randell October 1, 2009 at 7:11 am

Had a friend that just bought a home in Tampa for 40% of the appraised value!! Builder went bankrupt. If you enlist the services of a local, experienced realtor there is a lot of opportunity out there.

Craigslist Detroit October 16, 2009 at 10:41 pm

yes, its a fact that now is the time for those who never thought they could buy a home, to finally become homeowners and be able to buy a home very easily. The method and tricks you shared here are just great, helpful and can provide you a good chance to get a good residence than ever before.

Tom Galvin November 17, 2009 at 10:57 am

I started to think “How could I tap into the foreclosure market and make money”? Foreclosure cleaning business is a new business that is taking off and has unlimited potential.

Well, I tried contacting banks and mortgage companies but never made any head way then I found a great site where they explained the foreclosure cleaning business and the details of this opportunity.

deborah pryor January 24, 2010 at 12:49 pm

I only want to know why in order to view foreclosed or any homes for sale, they need to know everything about you. I plan to buy a house very soon but I can not find the foreclosed homes online. It would be very nice if I could check things online and have an idea of what homes I could afford on my own.

connie June 26, 2010 at 8:53 am

How to buy a home in foreclosure with no money and bad credit?

tammy August 22, 2010 at 2:10 am

How can I buy me a three bed room and two bath foreclosure home with a fireplace, with no money and for credit?

Troy. L January 17, 2011 at 11:50 am

Tammy – Try looking at getting pre-approved for a loan. Best advice I can give to those with bad credit.

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