What are foreclosure houses and who can buy them?

Asked by Missyfiona, Lakewood, OH Wed Sep 11, 2013

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Jeanne Solet…, Home Buyer, Phoenix, AZ
Fri Jan 24, 2014
Realtors have one side of the story and the buyer has the other.

I just purchased a home that was bank owned - Fannie Mae. There are two bank-owned sellers with the other being Freddie Mac. They both have websites that list their properties and the asking price. They do collect all offers, and if there are multiple offers will ask each to resubmit with their "best and highest" offer. They will then select a buyer which may or may not be the highest offer.

Also, as to "as is", that is after all mechanicals are deemed workable. The sales contract in Arizona outlines the items that must be in working order. After that it is "as is". Buyer does submit a BINSR stating they accept on those conditions; list any items that should work but do not - like AC or range for example.

My original offer was 12/31/13. Received pre-approval on 1/4/14 after resubmitting my best offer on 1/3/14. Then there is a five day wait for final approval. My loan was approved on 1/23, signing set for 1/27, closing on 1/30 - one day ahead of schedule.

The only sales that take a very long time are the short sales. Usually not worth the effort as price still high.

Many other foreclosures, especially HUD. google HUD PORTAL to see all these listings that change daily. DO NOT BE FOOLED BY WEBSITES THAT SAY "HUD FORECLOSED LISTINGS" BUT WANT TO CHARGE YOU ANYTHING - EVEN $1 - THEY ARE SCAMS.

I considered four homes, two Fannie Mae, one Freddie Mac and one by owner. Also looked at many others and was amazed at the 'pigs' that live in this country. The houses are not only trashed but stripped so far as plumbing and electrical and usually kitchens no longer exist.

This if the voice of experience. The ruling on short sales - if a person has had one - you use to have to wait 3 years before purchasing another home. That has been reduced to six months.

The two most important people in this process after yourself of course, is a realtor that you have hired after extensive research - sorry guys but that's the way it is. A license does not teach a realtor how to buy and sell, only the law. Secondly, the lender. I will not get into this as could write a book.

I won as you can see.
14 votes
I'd say half your post is incorrect misinformation. Any book you could write would be fiction based on your post...
Flag Mon Jan 12, 2015
Thanks for sharing the info and your experience, Jeanne!!!
Flag Tue Sep 2, 2014
very interesting info
Flag Sun Jul 6, 2014
very good info
Flag Fri Apr 11, 2014
Good Info. Thanks
Flag Wed Feb 26, 2014
Matt White, Agent, prescott, AZ
Sun May 4, 2014
Foreclosures - AKA, REO, Bank Owned, Lender Owned, Real Estate Owned, negative equity, distressed properties, and upside-down properties.

The best candidates for buying a foreclosure are cash buyers with extra cash to fix repairs. Usually referred to as "investors".

Buying a foreclosure for a primary residence is not a terrible idea, just make sure your agent knows what they're doing. Always have ALL the inspections completed, always make your purchase contingent on your needs and bottom line, not the bank's.

The foreclosure market is not what it was in 2008-2013. Markets with 69% negative equity no longer exist. Phoenix, AZ had the 4th worst upside down market in the nation in 2010. My own hometown had the 5th worst. My home town had a 55% negative equity market. Meaning 55% of the homes for sale were bank owned. Meaning if 1000 homes were on the market, 550 were foreclosures. Meaning... that was the market.

No one could sell a regular house without 5 comparable sales belonging to foreclosures readjusting their sale price. Attempting to explain that to a homeowner was almost impossible. "My home isn't worth anything anymore because 5 people quit paying their mortgage???"

So, as of mid 2013 into 2014, that is no longer the case. The market for foreclosures is about 4% in my town now. The availability of purchasing a foreclosure as a consumer is almost nothing unless you have the cash to compete with investors with deep pockets. If you do find a great deal with no one else bidding on it, do your complete research on the home. Talk to neighbors, talk to the previous owners, talk to a Realtor who works that area specifically.

I hate to draw a bad analogy, but foreclosures are like abandoned, abused children. It should never happen, but it does. Unfortunately the real issues may not become apparent until years later, after it's too late.
9 votes
Not only could you have found a different analogy, you SHOULD find a different analogy. Referring to "abused" children is just not in good taste under ANY circumstances.
Flag Fri Jan 29, 2016
, ,
Thu Sep 12, 2013
They are train wrecks caused by someone that did not pay back the money they borrowed. I would not limit my home search to any single form of seller ownership, but rather by what I want or need to purchase. You might find a better home right next door to a foreclosure that is priced aggressively and doesn’t have all of the garbage that comes with a foreclosure.

Jim Simms
NMLS # 6395
Financing Kentucky One Home at a Time
I answer questions about financing real estate based on my decades of experience dealing with mortgage underwriters. I do not offer legal or tax advice, if you need answers from an attorney or CPA find one knowledgeable in your local market.
Web Reference:  http://jamessimms.com/
5 votes
What an absolutely moronic comment. Most of the time, foreclosures are due to either a set of unfortunate events, or a financial difficulty of some sort. Saying foreclosures are "train wrecks" and "caused by someone who didn't pay back money they borrowed," not only over simplifies the whole issue, it's offensive to those who, through no fault of their own, were faced with very disastrous events. Also, have you forgotten how the banks, lenders, and realtors took advantage of people during the whole subprime mortgage crisis back in 2007-2009?! The guy below said it best: Screw you.
Flag Fri Jan 29, 2016
Screw u
Flag Tue Sep 30, 2014
AMEN! It isn't as easy as they make it sound on TV and you have way too many surprises.
Flag Fri Sep 13, 2013
Bill Villa, Agent, San Diego, CA
Thu Sep 12, 2013

Foreclosure homes are bank owned properties after a lengthy, legal process by the lender to obtain a home from a borrower who did not pay the mortgage payment as agreed. The lender incurs a large cash outlay to foreclose and then can re-sell the home to try to recover their costs and fees. So, foreclosures are bank owned property and the property's condition is unknown.

Buying a pre-foreclosure has advantages over a foreclosure as there are rules that lenders have agreed to follow once the sale of a pre-foreclosure starts. Many times the home is in better condition than a bank owned foreclosure as the owner has been living in the home. The pre-foreclosure owner is not as price sensitive as the lender and a lower price could be negotiated by our firm on your behalf.

Would you contact me to find out if a pre-foreclosure is right for you?


Bill Villa Broker=President
Villa Realty, Inc.
DRE #01758821
(888) 351-4264
4 votes
I'd be interested...for investment from Canada. Send an email
Flag Sat Feb 28, 2015
I would be interested in an email address as well!
Flag Thu Aug 7, 2014
Thank you,

could you leave an email address for me to contact you at?
Flag Thu Sep 12, 2013
teryka426, Home Buyer, Belvidere, NJ
Fri Sep 13, 2013
They are worthwhile if you are highly patient to wait. It is a long process. You are better off buying a home that is not foreclosing or foreclosed. Long legal process.
Most of the homes are wrecked to the extreme. Cash will get you the house quicker if you are willing to go through that whole process and have the time and money like investors who fix them and resell them.
Having a reliable and honest lawyer to cover you is most important. I have looked at so many during our home hunting process and did not bother with it. They are all "AS IS".

Best of luck with everything.
3 votes
Nicole Fedor…, Agent, Santa Ana, CA
Thu Sep 12, 2013
Foreclosures are bank-owned properties. They are typically in dire need of repairs and upgrades, and are priced accordingly. Any one who qualifies for a home loan may purchase a foreclosed property.

If you would like more information, or would like some listings sent to you, please contact me!

Nicole Fedorchek, Realtor
Tarbell, Realtors
3 votes
my name is Jean and I am looking for foreclosure houses and got cash money....my email is'' kingcandid26@yahoo.com.i want you to help me..thanks
Flag Fri Jan 17, 2014
Ingrid Ski R…, Agent, Mission Viejo, CA
Wed Sep 11, 2013
Hello Miss Fiona

Foreclosures are homes that the bank has files a notice of default ( which can be aold as a short sale) then the property goes to auction and sells at the auction or the bank takes it back and there ia no sale at the auction
The bank then has a realtor sell the home. You may have heard the term REO Real estate owned
Prior to the forecloses home anyone can buy it
When it goes to auction you can buy it at the court steps in placentia or Santa Ana You must have cashiers check to pay for it right there and know what your buying too. Not all properties do through the auction
Once a realtor gets the information from the bank to sell the property anyone can buy it. The bank decides which offer to accept. And the bank goes buy how much they will net
It's all about the money the bank will get

If you need some help and have any other questions you can email or call me

Ingrid Ski Realtor
3 votes
Jay Shapiro, Agent, Tenafly, NJ
Sun Mar 2, 2014
Most of the other respondents have defined a foreclosure but and although anyone can buy one, the real answer to the question you're asking is it depends upon when the property is being offered for sale.

If you attend a Sheriff's sale (auction) -- usually held in the County Courthouse -- you have to be able to act VERY quickly and able to put 10% down immediately. If you win the auction and do not perform to the terms of the contract of the purchase, you will suffer a financial penalty. Moreover, when you purchase at this venue, you can't get to see the inside of the house before the auction and additionally unless you've done a full title search you don't know what additional debt you may incur with the ownership of the property. It is very common for the bank to attend the auction and announce that it is willing to pay the full price of the outstanding mortgage (and/or more depending on the value of the property) which discourages many buyers from engaging in the sale because there is no "bargain" here.

If you wait to purchase the house after the lender has foreclosed upon it you will be better off because the lender will give you a clear title to the property Most likely you will be responsible for all certificates and inspections (this can be costly depending on the outstanding permits etc), The bank may want you to perform quickly and there is still room for negotiation, however, please keep in mind: if you think its a bargain, so does someone else and chances are you will end up in a bidding war. At that point, once again there may not be a bargain.

It has been my experience that many buyers think that a foreclosure is a real "deal" but that may only be true if you are an all-cash buyer who really knows what you're doing. Remember you will be competing with experienced investors who make it their business to purchase foreclosures.
2 votes
Raymond Whit…, Agent, Mesa, AZ
Fri Jan 24, 2014
Foreclosure homes are homes that the previous mortgage payors or "owners" failed to make their payments and fell behind. Eventually the bank or "true owner" foreclosed on the home and now owns the home and is re-selling it. The home can be in good or poor condition and it's really luck of the draw. Typically the seller of the foreclosed home just wants the "highest and best" price they can get. If the home is in poor condition and there is a lot of repairs to get it in "livable" condition then the person buying it will be restricted in how they can purchase it if they are seeking to get a loan. Banks don't make fha or va or even conventional loans on homes in non working condtion. So, that means either the seller fixes the home or it is purchased with cash only. There is a lot to say about foreclosed homes and you should get the help of a professional that can help you navigate the process.
2 votes
, ,
Thu Sep 12, 2013
Looks like you got a really good answer below.

Let me know if you need a purchase loan for the property or want to get pre-approved (this will increase the chances of your loan being accepted) because I can certainly help you out there. You can call me at 408-352-5147 or email me at AGreer@themortgageoutlet.com. You can check us out at http://www.TheMortgageOutlet.com. I will look at your situation and present you with some options.

Alex Greer
NMLS #1056079
2 votes
Suzanne MacD…, Agent, Succasunna, NJ
Thu Sep 12, 2013
Foreclosures are homes that have been 'repossessed' so to speak by the bank that held the mortgage on them because the prior owner did not make his mortgage payments as agreed. Anyone who can qualify for a mortgage, or who has the cash, can guy them once they are offered for sale by the bank. You will know when the bank is willing to sell them because they will be listed for sale with a licensed real estate agent.
2 votes
philcoaz, Home Buyer, Wickenburg, AZ
Wed Apr 2, 2014
what are short sales and under contract mean?
1 vote
Short sales is when a homeowner can no longer pay their mortgage so the bank agrees to forgive their debt. Under contract means the property is in escrow or the purchase agreement has been given to the bank for approval. If the bank does not approve the terms of the contract than their is no escrow and no deal.
Flag Fri Apr 11, 2014
blangalia61, Home Buyer, San Diego, CA
Wed Feb 26, 2014
how to justify and on what criterua you have to select best the estate agent to search house in san diego CA.
1 vote
Ramon Verdin, , Salinas, CA
Mon Jan 27, 2014
FHA has a loan available that will wrap the purchase price and costs of repairs into one loan. It's the FHA 203K. It can be used to buy properties that don't qualify for any other type of loan.
1 vote
Kawain Payne, Agent, Seal Beach, CA
Thu Sep 19, 2013
A foreclosure home is one in which the previous owner has lost the home and the bank now owns it.

You buy them the same way you buy any other home on the market.

Beware, many of them are sold "AS IS" meaning no repairs will be made.

The closing process can take a bit longer at times.

If you are using financing you may be asked to get cross approved by the banks preferred lender. You do not have to use them, just be cross approved by them.

When making an offer make sure you submit your best and final offer. Think of it as a silent auction. Most of the time the seller (the Bank) will counter no more than one or two offers. They pick the ones they feel are the BEST.

Best of luck to you!!!

Kawain Payne, Realtor
1 vote
joseph l. di…, Home Buyer, Queens, NY
Thu Dec 3, 2015
What is available for Veterans ?
0 votes
Tonyfortunes…, Home Buyer, New York, NY
Fri Jun 26, 2015
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0 votes
Latinavelez, Home Buyer, New York, NY
Sat Jan 10, 2015
How can you buy a foerclosure home?
0 votes
lucy florez, Home Buyer, Killeen, TX
Sat Dec 27, 2014
I have money cash to buy a 3 bedrooms and 2 bath, and good area, if I want to buy a foreclosure what I need to know?
0 votes
min's trading, Both Buyer And Seller, New York, NY
Mon Dec 8, 2014
I am an independant sourcer of materials and connections in China. I can find most things so if you have any requirements , just let me know.
0 votes
Home Searcher, Home Buyer, Las Vegas, NV
Thu Nov 13, 2014
You can buy a distressed property when it’s in one of the following phases:
- Pre-foreclosure – the homeowner still has control of the property.
- Auction sale – you may be bidding against lenders.
- Real estate-owned (REO) – a lender-owned property.
- Government-owned – potentially a slower process with more paperwork.
0 votes
Terryscollon, Home Buyer, New York, NY
Fri Nov 7, 2014
Is there any 1st time owner deals or grants that I would qualify for without a down payment? I live in New York and I make Aprox 32,000 a year?
0 votes
Mike Slatton, Both Buyer And Seller, Tampa, FL
Thu Aug 14, 2014
Foreclosures are properties that the bank has taken ownership from after the home owner stopped making their mortgage payments.

Anyone can buy a foreclosure, but foreclosures come with risks. You're better off purchasing from a wholesaler. A wholesaler buys foreclosures and other types of distressed properties in bulk, through auctions and estate sales, then trashes them out, cleans them up and gets them ready for an investor to rehab.

The profit margins for wholesalers are kept to a minimum with the plan for quick turnover. As an investor, you save money, time and sanity by not having to go through the auction process, or deal with the garbage, rodents and squatters.

We specialize in Tampa investment properties. Take a look at some of our wholesale properties - http://www.btgh.com/tampa-florida-investment-properties/ . They're ready for rehab.
0 votes
Schweefrog, Home Buyer, New York, NY
Tue Jul 1, 2014
whats my best option I owe to much on my loan to sell my place my house is not even as much as my loan should I do a short sale or foreclose on my place? if I do either one do I still owe my loan?
0 votes
Schweefrog, Home Buyer, New York, NY
Tue Jul 1, 2014
is there anyone from frederick md?
0 votes
Ingrid Ski R…, Agent, Mission Viejo, CA
Sat Apr 12, 2014
Hi MissyFiona

Good to see your actively looking for a place. If they go up for sale anyone can buy them. You can buy them at the court house steps too
You can google foreclosure and short sales to get some more information too
Talk to you soon

Ingrid Ski Realtor
0 votes
Darren Smith, Agent, Laguna Beach, CA
Fri Apr 11, 2014
Foreclosures can be the best way to get a great deal if you're not afraid to do a little work and exercise patience. There are a number of ways to buy foreclosures, most major banks are holding housing inventory resulting from foreclosed homes and they are listed in the MLS as REO or (Real Estate Owned). Government agencies own inventory that was previously insured by FHA, these would be purchased through Fannie Mae or Freddie Mac, and HUD. These homes however, are not going to be discounted as much as some of the stories you may have heard. To get the real discounts one needs to have cash and show up at the trustees sale auction. The Trustees sale auction is all cash (in the form of cashiers checks or money orders) and BUYER BEWARE! One needs to do all their due diligence, basic inspection, title search, investigate liens, etc. I advise to NOT venture into this without a trusted advisor who knows the ropes. Real estate auctions are an exciting and potentially lucrative venture for those so inclined to take the plunge. Happy Hunting!
Useful links: https://www.hudhomestore.com, http://www.homepath.com
About me:
I am the Broker/Owner of Landsmith Residential Real Estate Services, a representative of OneWest bank handling the listing and marketing of their bank owned inventory.
I have purchased over 300 homes at courthouse auctions in Southern California for our holding company and investors both large and small.
My staff and I are never to busy to help anyone in need of a trusted advisor in the real estate world.
Feel free to call! I'm always near the phone and happy to answer questions!
0 votes
Phyllis Rab…, Agent, Calabasas, CA
Fri Apr 11, 2014
Homeowners that did not short sale their home (which is better than a foreclosure on their credit score), let the banks take their home back and sell for as much money as they can get.

You can buy a foreclosure through a real estate agent if you can quality for a loan at the right price or sometimes if the property is in bad shape, you must pay with all cash.

Sometimes you can get a deal but not always. The banks are do not want to pay for many fees that a homeowner would agree to pay for.
0 votes
Maureen Saye…, Other Pro, Orange, CA
Sun Mar 16, 2014
They are homes that have been defaulted on by the prior home owner. Anyone can purchase them, although they normally are in bad shape.
0 votes
Ramon Verdin, , Salinas, CA
Wed Feb 26, 2014
These are homes that have been repossessed by the bank that held the loan on the property. 99% of them are sold through a real estate office much the same as any other "normal" sale. The selling bank first does a market appraisal to determine the current value, so most of the foreclosure sales do not give the buyer a price advantage.
0 votes
athijn, , Indian Lake Estates, FL
Sun Feb 9, 2014
What is the value of 1/2 acre lot on Plumosa drive in Polk County fl, 33855. Indian lake estate.
0 votes
Ramon Verdin, , Salinas, CA
Mon Jan 27, 2014
The FHA 203K streamline loan is a single transaction loan. 50% of the repair proceeds are given to the contractor at close of escrow, the other 50% is released upon verification by the appraiser that all repairs are completed. On a full 203K, monies are paid out as construction is completed. These are not construction or bridge loans. The rate is usually 1/4% higher that a normal FAH loan.
0 votes
Jeanne Solet…, Home Buyer, Phoenix, AZ
Mon Jan 27, 2014
That is true, however there might be a different interest rate on the portion used for repairs. This is written first at a higher rate while repairs being done, then wrapped into final loan. Almost like a signature loan at the bank at 13%.
0 votes
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