✏️ Editor’s Note: Realtor Associations, agents, and MLS’ have started implementing changes related to the NAR’s $418 million settlement. While home-sellers will likely save thousands in commission, compliance and litigation risks have significantly increased for sellers throughout the nation. Learn how NAR’s settlement affects home buyers.
82% of Americans believe that buying a home is a significant milestone in their lives. However, due to the rising home prices reaching a record high of $438,601, there’s a decline in home sales across the US.
But, there’s a silver lining. You can buy a foreclosed home as these homes sell approximately 28% lower than traditional homes. Moreover, 32,878 properties are filed for foreclosure in 2024. That’s a 10% rise from the previous year.
You can also buy a foreclosed home at a low price and fulfill your American dream of homeownership with Houzeo. With thousands of property listings, Houzeo.com is one of the biggest property listing sites in the US.
What Does Foreclosure Mean?
Foreclosure is a process in which a lender or bank takes possession of a property if you fail to make mortgage payments. Apart from this, the lender auctions off the home to recover the unpaid amount.
Moreover, the lenders try to sell the property fast and fetch the best possible price for it.
How Can You Buy a Foreclosed Home?
Here are the 6 steps on how to purchase a foreclosed home:
1. Know Your Foreclosure Options
There are 3 ways for buying a foreclosure home:
Short Sale: You may have to work directly with the bank to buy a short sale home before it goes to auction. This can be a good option to get a good deal but you should be prepared to wait for the bank’s approval.
Foreclosure Auction: You can hunt for deals at auctions. However, you must bid competitively and research beforehand, as these homes are sold as-is.
Bank-Owned Properties: These homes are repossessed by the bank. You can find them through the bank’s website or a real estate agent specializing in properties in REO (Real Estate Owned).
2. Find Foreclosure Homes For Sale
Here are some ways to search for foreclosed houses for sale:
- Print Publications: You can find huge data on foreclosed properties in local newspapers.
- Government Agencies: The government agencies like The Department of Housing and Urban Development, Fannie Mae, and Freddie Mac also sell foreclosed homes.
- Home-Auction Websites: Websites like Auction.com and Hubzu, feature foreclosed homes. Ensure you check their reviews from previous clients.
3. Hire a Real Estate Agent
A real estate agent can help you get through the foreclosure process of short sale or an auction. Additionally, you can buy these properties through MLS or traditional process of buying a house.
4. Get Pre-approved for a Mortgage
Once you have found a suitable agent, it is recommended to obtain a pre-approval for a loan. A pre-approval will give you an idea of the amount you can borrow for purchasing a home. Additionally, there are other financing alternatives available for purchasing a foreclosed home:
- 203(k) Loans: The 203(k) loans help home buyers roll the costs of both purchasing a home and renovating it into one mortgage.
- HomePath ReadyBuyer: HomePath is a Fannie Mae program that gives you financial assistance. With a conventional mortgage, you can buy a home with a down payment as low as 3%.
- HomeSteps: Through HomeSteps, Freddie Mac sells its foreclosure properties.
5. Get an Appraisal and Inspection
Home inspection and appraisal are two important things to consider while buying homes in foreclosure. It helps you to get proper value and assessment of the property.
Appraisals help you determine a property’s value and whether it’s aligned with the fair market value, conditions, and local housing trends.
A home inspection is a comprehensive evaluation of the property’s physical condition, including its structural elements, systems, and potential issues. It helps identify any repairs, defects, or safety concerns that might require attention.
» House Value Calculator: You can Houzeo’s online tool to estimate any property’s market value.
6. Purchase Your New Home
Check out your home appraisal and inspection report, then decide whether a home is right for you or not. Reaching out to your mortgage lender is important in this loan process.
This is especially important if you have the financial means or experience to carry out any necessary renovations. Lastly, your real estate agent is there to guide you through the process of submitting an offer and preparing for the closing procedure.
Find Homes for Sale Under Your Specific Budget
Pros and Cons of Buying a Foreclosed Home
Here are some of the pros and cons of buying a house in foreclosure:
| Pros✅ | Cons❌ |
| Foreclosed homes are often sold at discounted price as they are just to recover the loan amount. | Foreclosure properties come with an additional cost and repairs as they are sold as-is. |
| It only takes 30 days to sell foreclosure properties. | Foreclosure involves paperwork, which can be a lengthy process. |
| You can sell houses in foreclosure later with an increased price. | With low prices, these homes generally sell fast, which leads to many competitors. Also investors are interested in purchasing a foreclosure house. |
Should I Buy a Foreclosed Home?
Buying a foreclosed home can be tedious considering the additional paperwork it requires. Not to forget that many foreclosed homes could have structural issues.
Having said that, foreclosed houses for sale are a unique opportunity for buyers who wish to buy a home at a low price. Buying foreclosed homes could be a great investment in the years to come.
» Need More Clarity? Read these exclusive Houzeo reviews and learn why the platform is the best in America’s competitive housing market.
Frequently Asked Questions
How do I buy a foreclosed home?
To buy a foreclosed home, start by searching for properties through online listings, auctions, or banks. Once you find a property, arrange financing, inspect the home, and place a bid or negotiate directly with the lender.
» How to purchase foreclosed homes: Check out the step by step process of buying a foreclosed home.
Who should buy a foreclosed home?
Foreclosed homes are ideal for home flippers and investors. Any home buyer willing to renovate the property and seek a good deal should also consider buying foreclosures for sale.
How to bid on foreclosed homes?
To bid on a foreclosed home, research available properties through auction or bank listings, and ensure you have pre-approved financing. Attend the auction, place your bid, and be prepared to pay a deposit if your bid wins.
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