Many pre-foreclosure homes that previously were offered as short sales end up as foreclosures, which eventually are deeded to a bank. The reason why purchasers may refuse to buy a short sale home could be any of the following:
- Sellers stripped the foreclosure home's assets and/or vandalized the property.
- The bank refused to accept less than its present mortgage balance.
- Buyers passed over the short sale in favor of a hassle-free purchase.
- The location of the home and/or neighborhood was undesirable.
- The listing was overpriced at its mortgaged amount.
- The seller did not qualify for a short sale.
- Don’t assume that every foreclosure is a bargain—some can be financial nightmares.
- Inexperienced foreclosure buyers may want to hire a real estate agent to help them navigate the process.
- There are several ways to find foreclosures, including through your agent, via websites of bank-owned properties, and through government agencies.
- You can also try bidding for a foreclosure on the courthouse steps but be aware that you’ll be competing with professionals.
Working With Real Estate Agents
Not every foreclosure is a bargain, and some can morph into unexpected nightmares. There are drawbacks to buying foreclosures. Still, some foreclosed homes are diamonds waiting to be polished. Inexperienced foreclosure buyers may want to hire a real estate agent for guidance and assistance.
Agents have direct access to tools that consumers don't, like the Multiple Listing Service (MLS), which they use to share information about properties.
You also can ask your buyer's agent to search for real estate owned by lenders, known as REOs. If you see a listing agent's name over and over, pull up that agent's profile and look at their listings. You will probably find a ton of foreclosures at your fingertips.
Real Estate Signs
Driving through neighborhoods where you want to buy is another great way to find foreclosures. The signs might read foreclosure, bank-owned, or bank repo.
Call the agent whose name is on the sign and inquire about other foreclosure listings that may be coming on the market. Agents who specialize in foreclosures sometimes wait weeks while bank management approves the list price, so you can get a jump on other buyers by asking about new foreclosures not yet listed. If you are working with a buyer's agent, you can ask your agent to obtain this information for you.
Major Bank Websites
Many banks maintain online lists of foreclosed properties, but not every bank will sell to individual buyers. A more common practice among large lenders to dispose of REOs is to bundle them into a package and sell that package at a discount to investors.
Government Agencies and Other Options
- HUD: The site includes a list of the U.S. Department of Housing and Urban Development's foreclosure homes.
- The Federal National Mortgage Association (Fannie Mae): Find foreclosure homes through its HomePath website.
- Department of the Treasury: This provides a listing of homes seized by the Internal Revenue Service.
Private sector sources also are available to find foreclosure homes:
Asset Management Companies
Some lenders hire asset management companies to handle foreclosures on the lender's behalf. Wells Fargo uses Premiere Asset Services. Keystone Asset Management is a national agency that deals with defaults.
Auction companies hold huge auctions, sometimes selling as many as 100 homes or more in a single day. While many experts agree that auction companies often get higher prices due to the auction frenzy created among bidders, sometimes you can find a gem in their inventory. Popular auction houses include Auction.com, J. P. King, United Country Auction Services, Williams & Williams, and Bid4Assets.
Internet Foreclosure Companies
Web-based foreclosure companies charge a fee for providing you with a list of foreclosure properties. They charge because it takes time, trouble, and expertise to locate and assemble accurate national foreclosure lists. You may find it's worth it to let companies like Foreclosure.com and RealtyTrac search for you.
Courthouse Steps Auctions
You might also want to try your hand at bidding for a foreclosure on the courthouse steps. Beware that professionals often rule these premises. The downside is you generally are required to pay cash and buy the property sight unseen, and you could be assuming liens or judgments and be forced to pay delinquent property taxes.