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Buying Foreclosures: Three Stages, Three Sources  

Article by Lindsy Emery

For those looking for a deal on houses, foreclosure properties can be a great way to purchase a home for less than its worth. Buying foreclosures can be a great way for a person who wants a home to find a bigger house for less, or it can be a way for investors to make money on real estate property. This is because banks are looking to make some sort of return on their initial investment in the property, which they would otherwise lose when someone defaults on a mortgage.

However, there are often several stages that a property goes through in the foreclosure process. In each of those stages, there is often a different way to go about buying foreclosures. Knowing the three main stages will help you to determine who to talk to.


When the foreclosure process starts, the bank notifies the person residing at the property that they are in default on their loan and gives them a chance to pay the money to make up that default amount. There are a number of ways that they can remedy this. They can try to borrow additional money to help make up the difference, they can raise the missing funds themselves, or they can attempt to sell their home to pay the default amount.

If you are looking into buying foreclosures, you want to speak to the home owner at this point, not the bank. They are still in control of the property, and in some cases will be willing to sell the home at a loss and still have a chance to at least take away some of the money they’ve made for home equity. Another advantage to buying at this stage is that you can arrange to have the property appraised to evaluate whether purchasing is profitable for you. On the other hand, some owners can be difficult to deal with.


If the owner doesn’t raise the money for the amount that the loan is in default, then often the property can go to auction, and this is a great place for those looking to buy foreclosures. Often, the prices at the auction stage will be very cheap, sometimes better than you’d get from negotiating with the owner. Buying foreclosures at an auction is also a fairly straightforward process.

However, the auction holds pitfalls and disadvantages for those buying foreclosure properties. Chances are you’ll be bidding against the bank, so there’s a good chance you’ll be paying more than the minimum bid for the property. In addition, if you don’t have a chance to view the property beforehand, you might be purchasing a wreck of a home and not know it.

Bank-Owned Properties

Your final option for buying foreclosures is to contact the bank if a property has not been sold at auction. At this stage, there is still sometimes a chance for a great deal, since the bank will be trying to sell the property off as fast as possible.

There are down sides to this method of buying foreclosures as well, though. For instance, if the bank has listed the house already using an agent, buying foreclosures will include fees for the real estate agent, bringing up the price a little. Also, it’s a little difficult sometimes to get information from a bank about these properties, so be prepared to spend extra time at this stage. Remember that there are many different stages in the foreclosure process, which gives you a number of different methods you can use to approach buying foreclosures.

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