Buying Foreclosure: What You Need to Know

With the way the housing market has gone over the last two years, it’s been darn near impossible to elbow your way into already crowded open houses. Some buyers have opted to go the more nontraditional (and thus less predictable) route, like considering foreclosures. According to a 2022 report, purchases of foreclosed homes are up nearly 150%. It would seem that when homes are selling in a matter of hours, it may feel like all bets are off. 

This process is more complicated than most people realize and if gone wrong can actually cost you more than buying a traditional listing. Here are a few ways to protect yourself when buying a foreclosure. 

Find Legitimate Listings

You know those poster board signs on the side of the road that say things like, “Good Homes Cheap”? We’d caution against calling those phone numbers. Finding legitimate foreclosure options is actually really easy. Many home listing sites have a foreclosure tab you can select in the search filters. Or, you can call your county clerk and ask them where to find the next foreclosures headed to auction. 

See It In Real Life

Florida-based real estate agent Chris Hanson says it best, “the very best foreclosure advice I give to potential buyers is to immediately drive by the property and inspect the home and entire neighborhood as best you can from the street.” Typically, foreclosed homes are sold as-is and home inspections aren’t always permitted. It’s definitely worth asking, though! When an inspection is allowed, always opt for one!

Cash Requirements 

Buying a foreclosure typically means getting more house for your dollar, but it still requires a plan and dedication. You will likely not end up with a traditional mortgage and will probably find yourself at an auction. Be sure to read the rules and expectations with a fine tooth comb. For example, some auctions require an all-cash purchase, and often, 10% cash down is required at the sale. You’ll generally have up to 30 days to repay the rest. This can land you a fantastic deal but can also get you in hot water if you’re not actually prepared to pony up all the cash. 

What best helped prepare you to purchase a home in foreclosure? Tell us in the comment!