“Foreclosure” is not one kind of sale. It is three different markets with different sellers, rules and risks. Picking the right one for your experience level matters more than finding the “best deal.”
Path 1: Pre-foreclosure (buy from the owner)
The owner is in default but still owns the home. You negotiate a normal purchase — or a short sale if the price is below the debt, which needs lender approval and patience. You can usually inspect the home and use financing. Risks: tight deadlines before auction, junior liens that must be settled, and state laws that restrict deals with homeowners in foreclosure. Best for: buyers who can move carefully with an agent and attorney.
Path 2: The auction
The property is sold to the highest bidder, typically for cash on the day, sight unseen inside, with no contingencies. You can inherit occupants, damage, and sometimes liens that survive the sale. The discounts can be real — so can the losses. Best for: experienced investors with cash, title research skills, and a repair/eviction budget. First-timers should watch several auctions before bidding in one.
Path 3: Bank-owned (REO)
The lender already foreclosed and lists the home, often on the MLS or through auction platforms like Auction.com, Hubzu and Xome. This looks most like a normal purchase: inspections are often possible, financing usually works, and title is typically cleared by the bank. Prices are closer to market, but so is the safety. Best for: first-time foreclosure buyers and owner-occupants.
Finding properties
Listing services aggregate public foreclosure records and REO inventory nationwide. Compare a few, learn what each stage’s data looks like in your county, and cross-check anything important against county records. Start with our listing partners page.
A sane first-purchase plan
- Pick one path (REO is the gentlest) and one or two target neighborhoods.
- Get pre-approved (or proof of funds) before you shop.
- Pull the property’s tax and lien picture from county records, or pay for a title search.
- Drive by; estimate repairs generously; add carrying and resale costs.
- Set a maximum price based on after-repair value minus costs and margin — and honor it at auction fever moments.
- Close with a title company and get title insurance whenever the sale type allows it.
Understand the process itself first — our step-by-step foreclosure guide shows where each buying path branches off.