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Buy a foreclosure home and you may be able to score a great bargain. That’s because they often sell for much less than typical homes on the market. But it’s important to know where and how to look for a foreclosure property.
- Most foreclosures aren’t listed on the MLS. So you’ll have to work a little harder to find one
- A new report lists the top 10 cities with the highest foreclosure filings. You can find foreclosure deals in these metros
- You can also talk to real estate agents, drive through neighborhoods, and search using online tools and bank websites
The key to getting the best bargain? Find and buy a foreclosure home before it’s listed.Verify your new rate (May 26th, 2020)
Cities with more foreclosures
Want to know the best areas for finding foreclosures? A new study by ATTOM Data Solutions lists the top 10 cities with the highest number of foreclosure properties by mid-2018:
- Chicago: 5,148 foreclosures
- Philadelphia: 3,578 foreclosures
- Cleveland: 3,208 foreclosures
- Miami: 2,801 foreclosures
- Houston: 2,707 foreclosures
- Las Vegas: 2,437 foreclosures
- Brooklyn: 2,254 foreclosures
- Baltimore: 2,100 foreclosures
- Jacksonville: 2,001 foreclosures
- Phoenix: 1,992 foreclosures
The cities with the biggest increase in foreclosure filings were Phoenix (up 36.72 percent since 2017), Cleveland (up 23.48 percent), and Houston (up 9.46 percent).
Why foreclosures can yield big savings
Daren Blomquist, senior vice president for ATTOM Data Solutions, says buying a foreclosure can save big money.
“Foreclosures involve a motivated seller. Also, the property often is in disrepair. Those two factors mean foreclosures often sell below the property’s full after-repair market value,” he says. Our data shows that, even in hot housing markets, they consistently sell below the overall market median price.”
In fact, the median sales price of a bank-owned foreclosure property is 37 percent below that of the overall market, per ATTOM Data Solutions data gathered since 2000.
“Foreclosure discounts are actually more substantial in a booming housing market. The reason is that foreclosures are rare and don’t drag down the overall market as much,” Blomquist notes.
Why foreclosures can be harder to find and buy
Finding a foreclosure property isn’t always easy. Most are off-market properties. In other words, they’re not commonly listed for sale on the MLS, says Blomquist.
“Your best bet in getting the best deal is to purchase one before it’s listed. Once it’s listed, it’s exposed to a much bigger pool of potential buyers.”
Want to buy a foreclosure? That can be tricky, too.
“You don’t have a listing agent motivated to sell the property and get a commission,” he adds. “This means you are going to have to be willing to put in extra time and legwork to track down the right people to contact and make an offer.”
You may also need to pay with cash or a hard money loan if you buy a foreclosure at auction. But after buying, you can try refinancing at a lower rate. Then, you can even flip the property quickly to pay off the loan.
“This can be a good strategy. With a private loan, you’re not having to pony up all the cash yourself. Plus, it allows you to use leverage to buy more foreclosures if you choose,” says Blomquist.
Tools that can help
To help you find a foreclosure or pre-foreclosure in your chosen market, try these tips:
- Use ATTOM Data Solutions’ pre-foreclosure data site
- Drive through a community. Look for signs indicating “foreclosure” or “bank-owned.” Also, hunt for pre-foreclosure properties. These will appear run-down and abandoned. You can check on their status with village officials
- Ask real estate agents in the area
- Visit bank and lender websites, which often list foreclosed properties they own
- Search foreclosure homes for sale by HUD, Fannie Mae, S. Department of the Treasury, FDIC, GSA, and USDA.
Why a foreclosure buy is worth it
Yes, foreclosures are harder to find because they are rare and often snatched quickly.
“But they also often represent a better deal for those willing to put in the work to find them,” he adds.
Also, this doesn’t have to be your primary residence. In fact, flipping a foreclosure can be an ideal strategy.
“Most foreclosures are value-add opportunities,” Blomquist says. “You can add a ton of value to a home in a short time by rehabbing. And because home prices continue to steadily climb, the profit from flipping is padded by strong home price appreciation.”Verify your new rate (May 26th, 2020)