Buying a Foreclosure | Jade Halama

Buying a Foreclosure

What is a Foreclosure?

Foreclosure is the process by which the lender, often a bank or a mortgage company, seeks to take a property from the owner because the owner has missed payments on the loan. Because lenders are seeking to re-coup some of the lost income from the property, they often will sell foreclosures below market value.


Pre-foreclosure is the stage at which the owner is delinquent on their mortgage payments and they have been given notice that the foreclosure process is about to begin. At this stage the owner can try to avoid going into foreclosure by choosing to sell the property quickly and recoup some of their investment to cover their existing debt with the mortgage lender or try to get the loan back into good standing with their lender.

In order to buy a property that is in pre-foreclosure, you will need to approach the owner with an offer to buy the property outright. Selling a home before a foreclosure occurs will help the owner salvage a bad situation and avoid lasting effects on their credit. You can find properties that have gone into foreclosure will be listed with county courts or on sites like

What Are Some Ways to Buy a Foreclosure?

Foreclosure Auctions

If the owner is unable to resolve the issues around the property that lead to a pre-foreclosure, an auction will occur. You can find out about upcoming foreclosure auctions in your area at The winning bidder often has to pay cash at the time of purchase and there’s little opportunity to research the property beforehand. The starting bid is usually the amount still owed on the property which means there are some great deals to be had. The catch is that the buyer is not able to do the research that is normally done during the escrow process. If there’s an issue with the title, the condition of the property, or anything else- the buyer is responsible.

Bank Owned Properties

If the property is still unsold through the Pre-foreclosure and Foreclosure Auction steps of the Foreclosure process, the mortgage lender will take ownership of the property. The lender’s goal is to eventually sell the property to make back what they are still owed on the unpaid mortgage. There are many steps that the bank will go through during this process which usually means that buying a bank owned property is a much longer process than a traditional sale. You can find Bank Owned Properties at

Weighing the Risks and the Rewards of Buying a Foreclosure

The major draw of buying a foreclosed property is the opportunity to get a price well below market value. Foreclosures are usually sold in as-is condition which can mean expensive and time consuming repairs. Homes that have been sitting vacant for some time may have termite damage, vegetation overgrowth, and vandalism. Limited research into the property before a rushed purchase can result in unexpected or hidden costs which can eat into the savings that you had hoped to score. Proceed with caution and find a realtor you can trust.