What is Foreclosure?
Foreclosure is a process that allows a lender to recover the amount owed on a defaulted loan by selling or taking ownership (repossession) of the property securing the loan. The foreclosure process begins when a borrower/owner defaults on loan payments (usually mortgage payments) and the lender files a public default notice. The foreclosure process can end one of four ways:

The foreclosure process represents three bargain-buying opportunities.

Pre-Foreclosure (NOD, LIS):
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.

Auction (NTS, NFS):
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction often offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

Bank-owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender will usually want to re-sell the property to recover the unpaid loan amount. The lender will probably make sure the title is clear for any buyer, but the potential bargain is typically less than a pre-foreclosure or auction property.

Before you buy
You'll need to make sure you're armed with the resources you'll need to buy foreclosed properties.

Get Financing
Obtaining financing not only gives you an estimate of what you can afford, it also enables you to move quickly once you locate a property that interests you. When you approach a borrower/owner or a foreclosing lender about a property, secured financing will demonstrate that you are a serious buyer and are ready to buy quickly.

You can apply for financing on this site and we will respond immediately. The application is free.

Contact an Agent
If you're a first-time homebuyer and you've never purchased a home, let alone a foreclosure property, it is beneficial to contact a local real estate agent who can guide you through the process of buying a foreclosure. If you work with an agent, make sure they know your priorities. Ask any potential agents if they have experience with foreclosures. Especially for first-time buyers, a good agent can be a comforting and helpful resource.

Contact Owner

Depending on the property status, the seller will be the owner in default, the trustee or the foreclosing lender. To determine the property status on RealtyTrac, look at the Foreclosure Status gauge on the Property Details page.

Pre-Foreclosure (NOD, LIS):
Buying a property in pre-foreclosure involves approaching the borrower/owner and offering to buy the property. The borrower/owner can walk away with something to show for any equity in the property and avoid a bad mark on his or her credit history. The buyer has time to research the title and condition of the property and can realize discounts of 20-40 percent below market value.

Contact Owner: Pre-Foreclosure

When a property is in pre-foreclosure (NOD, LIS), the owner still has a chance to stop the foreclosure process by paying off what is owed or by selling the property. The pre-foreclosure period can last several months, so you may need to be patient when trying to contact the owner in default.

Call the trustee
The first step is to call the trustee listed on the Property Details page to confirm if the property is still in foreclosure. The trustee has the most up-to-date information if the owner has sold or reinstated the property. The trustee cannot answer other questions about the property.

Evaluate the property
If you haven't done it already, you'll want to evaluate the property's value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment. 

Contact the owner in default
If the trustee confirms the property is still in foreclosure, and you believe the property could be a wise investment, you should contact the owner in default as soon as possible. 

Other contact options
One option is to call the owner if you can track down the phone number. Another option is to go to the property and try to contact the owner in person, as long as you recognize the ownership rights of the owner. We don't recommend either of these options if you don't have previous experience.

Auction (NTS, NFS):
If the loan is not reinstated by the end of the pre-foreclosure period, potential buyers can bid on the property at a public auction. Buyers often are required to pay in cash at the auction and may not have much time to research the title and condition of the property beforehand; however, a public auction offers some of the best bargains and avoids the unpredictability of dealing directly with the borrower/owner.

Contact Trustee: Auctions

Before the auction, you may have a chance to work out a last-minute deal with the owner in default. Usually a property is scheduled for auction just a few weeks before the auction occurs, so you may have to move quickly if you want to contact the owner.

Call the trustee
Auctions can be postponed or canceled anytime, so no matter what the auction date listed on (even if it's in the past), it's always a good idea to contact the trustee to confirm. We recommend you call when you first locate the property and the day before the property is scheduled for auction. The trustee has the most up-to-date information if the auction has been canceled or postponed. The trustee cannot answer other questions about the property.

Evaluate the property
If you haven't done it already, you'll want to evaluate the property's value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment. 

Attend the auction
If you believe the property could be a wise investment, you can attend the auction to bid on the property. Your data provider has the auction date, time, location and opening bid. If any of this information is missing, you can often get it from the trustee or sometimes from the county clerk. If you've never bought at auction before, we recommend you attend an auction just to observe before you attend an auction to bid.

Bank Owned (REO):
If the lender takes ownership of the property, either through an agreement with the owner during pre-foreclosure or at the public auction, the lender usually sells the property to recover the unpaid loan amount. The lender typically clears the title for any buyer, but the potential bargain is often less than a pre-foreclosure or auction property.

Contact Owner: Bank Owned

If the property is Bank Owned (REO), your first step is to contact the bank, called the lender on RealtyTrac's Property Details page. You should contact the lender directly and ask for their REO or asset management department to find out how you can view and possibly make an offer on the property. REO means "Real Estate Owned" by the lender. It's another way to say the property has already gone through the foreclosure process and has now been repossessed by the foreclosing lender.

Evaluate the property
If you haven't done it already, you'll want to evaluate the property's value and check for any additional loans or liens encumbering the property so that you can make an informed decision about whether the property is a wise investment. 

Contact the lender/bank
Your data provider usually has the name of the lender listed on the property, but if you have trouble finding a phone number or address for them through the Internet or otherwise, below are suggestions for tracking down the lender.

Make an Offer

If you have never purchased a foreclosure property before, we recommend that you have a real estate agent help you prepare and make an offer.

Evaluate the property
To get an estimate of the potential bargain for any property, you need to find out the estimated market value of the property, how much is owed on the property and if the owner has any other loans or liens encumbering the property. On the Property Details page, RealtyTrac usually provides the estimated market value and the estimated balance of the loan in foreclosure, called either the Balance or Opening Bid.

Make an offer
Based on your research of the potential bargain, you can make an offer. Usually the offer amount is somewhere below the market value but above the total outstanding liens and estimated repair costs. If the property is a pre-foreclosure or bank owned, you could prepare an offer similar to a typical purchase offer, contingent on a full inspection and title search.

Bid at auction
If the property is selling at auction, you will need to make your offer, or bid, at the auction. In many states, bidders are required to pay in cash in the form of a cashier's check at the auction. You probably won't be able to conduct a full inspection and title search when you buy at an auction, so it's important to do good research before attending an auction.