You can find free foreclosure listings in several different places. Whether you want to buy a new home or an investment property, homes in foreclosure may provide a great deal.
Finding real estate foreclosure listings is fairly easy. Since the lenders and entities that own foreclosed homes strive to sell them as quickly as possible, they often provide listing resources online and on site free of charge. Public records, banks, mortgage lenders, real estate agents and the U.S. Department of Housing and Urban Development (HUD) are amount the most popular sources for listings, foreclosure and pre-foreclosure.
The best way to find a foreclosed home depends on how much time you have to devote to searching. How much help you need depends on your real estate knowledge and ability to research. The same can be said for buying a foreclosure once you find it. You probably need some level of professional help, whether that's a real estate agent who walks you through every step or just a home inspector to evalute the condition of the home before you buy it.
Let's start by looking at the five main ways to find listings of foreclosed homes and homes in the foreclosure process.
Find local foreclosures here.
1. Public records and notices
When a homeowner defaults on a mortgage, he or she typcially receives a Notice of Default (NOD), Lis pendens, which means "suit pending," and/or a Notice of Sale (NOS). The lender is required to file these notices with the county court and publish them in the legal notices section of the local newspaper.
County records and newspapers give you foreclosed property listings earlier than most other resources, because the homes are not actually foreclosed upon yet. Just remember that scheduled sales and auctions can be cancelled if a homeowner pays the deficit on the mortgage before the home is foreclosed. And in many states, a homeowner can get the house back even after it sells at auction under what's called right of redemption laws. Notices in public records are for homes that are still in pre-foreclosure. You need to check on the foreclosure status of these properties often. Or, you may opt to contact the homeowner directly and inquire about buying the home before it is foreclosed.
To learn more about buying homes in pre-foreclosure, go to this article. It provides information on finding homes in pre-foreclosure, homes in the HUD Short Sale program and the due diligence you should do before you buy a home in the foreclosure process.
2. Websites for REO properties
One of the best places to look for foreclosed home listings is on individual bank websites. Many banks have detailed listings of their real estate owned (REO) properties. These homes may also be listed with the real estate broker handling the sale. Here are links to some of the major banks with foreclosed properties for sale.
Your local banks, credit unions and other mortgage lenders may also have foreclosure listings, so check their websites. If they don’t show foreclosures in your area, ask one of their employees if they give out listings of their foreclosed homes or can refer you to the real estate broker handling their REO properties.
3. HUD foreclosures online
Another great online resource for foreclosure listings is the HUD Home Store website. When government-insured mortgages such as Federal Housing Administration (FHA) loans go into foreclosure, the government pays the lender a percentage of the mortgage balance and takes possession of the homes. The HUD website lists these homes by state. The website provides home specifications, photos and insurance ratings that dictate whether you may use FHA loan programs to buy these HUD homes. HUD home listings range from condominiums to four-unit complexes.
You can use the address provided to double check the basic property information on websites like Zillow.com and Trulia.com. Both sites provide the prices of comparable homes in the neighborhood and some basic history of the home's sales. If you want more information about the home, you may research the address at your county clerk or recorder's office and the tax assessor's office. You can do this research online in some states, but may be required to do it in person. You may also do a property title search, or pay a title company or a real estate attorney to do one for you.
A property title search discloses:
- The legal owner
- The liens on a property
- Land restrictions such as covenants and easements
To learn more about buying HUD homes, this guide explains the types homes you will find on the HUD site, how to determine condition from the listing and the types of financing you may use.
4. Foreclosure websites
Both Zillow and Trulia also provide listings of foreclosures in areas you want to buy. There are many other online resources for foreclosure listings, both national and regional. Some foreclosure websites require a service fee, which may be money well spent if they offer an alert feature that sends you a notification when foreclosed properties that match your specifications are listed. If these listings include the real estate agent or company representing the home, you want to talk with an agent directly to get the most up-to-date information about the home. If that contact information is not in the listing, you can research the property in county records.
5. Neighborhoods
If you know which neighborhoods you are targeting and live nearby, explore them in person. You will see distinctive real estate signs in the yards of REO properties, foreclosed homes and some homes in pre-foreclosure. The signs should indicate whether the home is foreclosed or in pre-foreclosure and who to contact for more information.
6. Real estate agents
Real estate signs advertising foreclosed homes will guide you to real estate agents who specialize in foreclosure listings in your target neighborhoods. Agents will have other foreclosed homes on their websites. You should also talk to them about your ideal property and neighborhood as they may know of homes that are coming up for sale, but not yet advertised. Agents network with lenders, represent REO properties and are experts at searching multiple listing service (MLS) sites. They will give you help and advice for free. Plus, you may decide to hire one of them. In some instances, such as buying HUD homes, you are required to work with an approved real estate agent.
Now that you know where to find foreclosured homes, you need to understand the two main ways to buy them. Lenders typically try to first sell these homes in foreclosure auctions. When they don’t sell at auction, they become REO properties. However, a lender or government agency like HUD may forego the auction and sell properties outright.
How to buy a foreclosed home at auction
You may get the lowest price on a foreclosed home at an auction, but you will need some cash. Auctions require you either pay the entire house price in cash or make a down payment in cash. The down payment amount varies by auction, with a typical range from 5 to 20 percent of the price. You will need a cashier’s check to cover that amount the day of the sale. Additionally, many auctions require you prove that you are pre-approved for a mortgage to cover the remainder of the purchase before you are allowed to bid.
A real estate agent who specializes in foreclosures can teach you how to buy a foreclosed home. He or she can also help you find foreclosure listings and investigate the home’s condition. If you choose not to work with a real estate agent, you probably want to attend an auction or two before you attempt to buy. You definitely want to find out the auction rules before you attend.
Whether you choose to use an agent or not, you will want to compile a list of auction sites and research opening bids. Auctions can be quite competitive, so you may have to bid on more than a dozen homes to get one.
Auction rules to research:
- When you may register
- How to register to bid
- Bidding requirements
- Upfront payment requirements
- Time allotted to complete sale
Be forewarned that properties are sold as-is and you often do not get an opportunity to walk through the house or have it inspected before an auction. You can research the property with address on the foreclosure listings. At the very least, visit the outside of the home and do a title search to verify it doesn’t have liens other than the first mortgage holder. Read more about the issues that may be associated with a home purchased at a foreclosure auction here.
How to buy an REO property
The REO sale process varies by lender or agency. Banks and other mortgage lenders usually have an internal property asset manager who handles the sale or they hire real estate brokers to handle the home sales. Listings indicate who you should contact to inquire about buying the home.
A major benefit of buying an REO home is that you may have it professionally inspected before you make an offer. The inspection report can also help you negotiate price. Most lenders have REO homes appraised and then list them slightly under market value. If the inspection report discloses that major repairs are needed, you can make an offer that reflects the cost of repairs. Older listings tend to offer the best opportunity for low prices, often because the homes need expensive maintenance and repairs.
You can buy most REO properties without a real estate agent, but an agent who specializes in foreclosed homes knows how to find the best bargains, negotiate with lenders, make an offer that gets accepted and close the sale.
How to buy a foreclosed home from HUD
If you want to bid on a HUD home, you must work with a HUD-approved real estate agent. This agent can help you arrange a walk-through of the property and a home inspection, which is advised by HUD. He or she can also help you understand the HUD bidding process and whether the home is eligible for FHA loan programs.
Your HUD-approved agent can help you compare homes HUD has for sale with other REO properties. The ideal home or real estate investment property for you depends on your needs and resources.
Weigh the risks before buying
While a foreclosed home may be priced below market value, real estate agents warn that these homes may have many problems, both visible and hidden. If the previous owner damaged the house, it will probably be obvious. But if the home has been vacant for years, it may have a myriad of issues, such as broken water pipes, appliances or heating and cooling systems. Often, the water, gas and electricity are off in a foreclosed house. When you want to buy an REO property, you can ususally ask the lender to have utilities turned on so the inspector can check plumbing, appliances, furnaces, air conditioners and electrical wiring. But when you buy a foreclosure at auction, you won't have this option.
Additionally, companies that provide homeowners insurance limit how long a home may be unoccupied or vacant. A home that has been vacant for years may be uninsurable or require a vacancy endorsement at an extra cost. HUD home listings include the insurance rating, so you have a better idea what to expect. REO properties don't tend to offer that information, so you want to talk to insurance companies before you buy.
For more information about homes HUD owns, get our comprehensive guide here.
If you fully understand the risks, yet still want to consider foreclosed homes, get local listings of foreclosures now. There are just as many accounts of buyers finding great homes at low prices, with little or no needed repairs, as there are horror stories of houses that requiring over $10,000 in repairs.
For more information about buying a new home from traditional real estate listings, finding homes in pre-foreclosure, financing, selling your home and other real estate topics, check out these articles.
Resource Library:
- Real estate listings: 5 crucial steps when shopping for a new home
- Houses for sale: what listing sites wont tell you about finding the perfect home
- What's my home worth? Finding home value comparisons
- 6 steps for buying homes in pre-foreclosure
- Home financing options for you
Photo credit: (bottom) JefferyTurner and (middle right) sgroi via Compfight CC.