How To Find & Buy Foreclosed Homes in Any Market
Foreclosed homes represent an opportunity for house hunters and real estate investors. Here’s how to find these deals.
One of the biggest opportunities available for real estate investors is foreclosed homes.
Buying these properties creates win-win situations for both you and the homeowner.
You get a property at a price that’s typically significantly lower than actual market value and your homeowner gets a bit of relief from a stressful financial situation.
Finding these types of properties before other investors get a chance to look at them, though, requires the right process.
In this guide, we’re going to break down step-by-step how you can start locating foreclosed properties, get your offers submitted, and grow your real estate investing business using this strategy.
Before we get into those steps, though…
What is a Foreclosed Home?
A foreclosed home is any home that underwent repossession by the lender or bank. When a homeowner can no longer make their mortgage payments, the property is repossessed after civil foreclosure procedures and is moved under the ownership of the original lender.
To help recoup the losses incurred, these lenders will then put the home onto the market where investors can submit offers to purchase it.
Since the lenders want to collect money as quickly as possible, these homes are typically listed at a hefty discount, making them a great opportunity for investors to turn a profit.
There’s other situations, though, where you can get in as an investor BEFORE the foreclosure process actually starts:
- Pre-Foreclosures: If the property hasn’t actually gone through civil proceedings yet, homeowners may be able to sell the property before it gets sent to auction to avoid the foreclosure process.
- Short Sales: When a home is worth less than the borrower owes, banks may allow them to “short sell” the property at a heavy discount to recoup part of their money without foreclosing.
- Sheriff's Sale Auction: When the homeowner has defaulted on the loan, they may enlist the local law enforcement authorities to auction the property off on the court house’s front steps.
- Bank Owned Properties: If the property didn’t sell at an auction, the bank will take possession and let their real estate-owned (or REO) department handle getting it sold.
- Government Owned Properties: When a home was purchased using a government-guaranteed loan, like an FHA or VA loan, the government may repossess the property list it with a broker.
The key to finding these properties, though, is using the right approach and exhausting all the options you have at your disposal -- looking at each type of “foreclosure” above.
How To FIND a Foreclosed Home in Any Market
Once you understand exactly what you’re looking for, the next step is finding these properties so you can begin making bids or offers on them.
Here’s how to get started.
1: Build Your List
Since these properties tend to move quickly, you’ll want to build a system that moves as quickly as they do. Being organized is one of the easiest ways to stay efficient in how quickly you can make offers when foreclosed properties come onto your radar.
One of the best ways to stay organized is with a CRM like REISift.
With it, you can use the Siftline boards to keep all of your leads organized and consistently monitor where they’re at in your sales pipeline -- from fresh prospect to deal that’s going through closing.
You can also pull owner records on properties you’re thinking about buying so you can easily market to them using cold calling, direct mail, or door knocking.
Combine that with the list stacking, vacancy checks, and phone status (plus skip tracing) and you’re able to locate highly-motivated sellers before they get into the foreclosure process.
If you aren’t using something like REISift right now, check out a guide we’ve written that breaks down how (and why) you should be using a CRM in your real estate investing business.
2: Real Estate Data Software
You can use a service like Propstream to help find pre-foreclosure and foreclosure properties then plug them into REISift to help manage your sales process.
By pulling lists from Propstream, then importing them into REISift, you can use REISift’s data filtering feature to find the freshest listings and build a plan for getting in touch with the owners.
REISift and Propstream are two of the best tools you can use to find these properties before other investors get a chance to make offers on them.
3: Government Sites
You can also use government websites like HUD Foreclosures to find listings managed by the office of Housing and Urban Development.
Both sites let you search by the location you’re looking to invest in, as well as the MLS number if you happen to have it before you start searching.
Auctions are an amazing resource for investors, especially foreclosure auctions.
You can use Auction.com to find thousands of properties that have been listed on and begin bidding on them, either online or in-person. The website helps you determine whether a property is bank-owned or foreclosed.
These auction sites are one of the most common methods bank use to begin selling the properties they were forced to foreclose on.
5: Foreclosure Listings
If you’re looking for properties that may not have yet gone through the civil proceedings and had the foreclosure finalized, you can look at Foreclosure.com.
It has over a million homes listed at any given time, many that are considered pre-foreclosure where the homeowners are still in control of the property.
Since they still have control, they may be able to quickly short sell the property to you in order to get out from underneath it and avoid the foreclosure process altogether.
To find foreclosures in your local area, you can check out the local newspaper.
Since banks are required to notify the public before filing for foreclosure, the lenders will post a “Notice of Sale” in your local newspapers.
If you’re looking to invest in a specific area, it can be worth your time to subscribe to these papers to make sure you’re staying on top of listings as they’re being announced every day.
7: Local Connections
In real estate investing, your network is your net worth.
By getting out into your community and connecting with the types of people who may have leads on the specific properties you’re looking for, you can be one of the first people they notify if they come across those types of properties.
Networking with people like real estate agents and brokers, contractors, and attorneys can give you an “in” on properties that may be coming up for sale before other investors get a chance to look at them.
8: Driving For Dollars
Driving for dollars, or getting in your car and beating the streets of your local neighborhood, is one of the most underrated strategies for finding pre-foreclosure and foreclosure properties.
Since many investors hate doing it, if you start doing it you’re gaining an easy competitive advantage.
If you’re going to go driving for dollars, though, you want to make sure you’re being as effective as possible. Check out the video below that breaks down the strategy in detail:
9: Direct Mail
Direct mail is one of the highest ROI (in both time and money) strategies you can use to grow your real estate investing business.
The key to making your direct mail campaigns work, though, relies on 3 key factors: the list you start with, the message you send, and how you follow up with the mail you’ve sent.
By starting off with a list of quality leads (using Propstream & REISift), and a message that’s targeted to the situation you’re in, you can dramatically increase your response rates.
But, you want to make sure you’re actually following up with those leads on a regular basis. That’s where staying organized makes sure you aren’t letting potential prospects fall through the cracks.
To learn more about this highly-effective (and profitable) strategy, check out the video below:
10: Cold Calling (+Skip Tracing)
Picking up the phone and calling your leads is another strategy that many investors hate doing -- but one that can give you a competitive edge if you use it.
The key again, though, is making sure you’re being as efficient as possible.
Part of that means skip tracing the data that you’re cold calling to make sure it’s actually who you want to be calling and that you aren’t just wasting time and energy.
When you plug your data into REISift, you can easily skip trace the information to ensure it’s accurate.
Then, once you’ve verified the information, you can use cold calling software to begin contacting each of the leads you’ve plugged in.
Check out the video below to learn more about how to cold call to grow your business:
How To BUY a Foreclosed Home in Any Market
Now comes the fun part: actually buying the foreclosed properties you’ve located.
To do that, you’ll want to follow the steps below:
Step #1: Find Funding
It’s a good idea to have your funding secured BEFORE you start looking for properties.
Since foreclosures tend to move quickly, waiting around for weeks (or even months) for your funding source to get approved can mean you lose more deals than you close on.
There’s a few ways you can do it, from private lenders (like friends and family), to hard money lenders (from other investors), or even getting pre-approved by your bank.
If you’re looking for funding options, check out our guide on creative financing strategies for investors.
Step #2: Inspect The Property
Before you purchase the property you want to make sure you’ve performed a thorough inspection.
This will help you figure out exactly what it’s going to cost to bring the property back up to market value and ensure you’re avoiding making a costly mistake.
You will also need to check for squatters on the property.
While homes may not stay on the market long, if the property has been foreclosed on there’s a chance the previous owners are squatting in it until they’re forced to leave.
This can become a MASSIVE headache for you as an investor.
Step #3: Weigh Up The Pros & Cons
Once you’ve performed the inspection and made sure squatters won’t be a problem, you’ll need to weigh the pros versus the cons to see if the property makes sense.
Think about the costs involved, how long the project is going to take, what other properties are selling for in the area, potential hidden costs, and your ability to get the project done and then sold after it’s completed.
Step #4: Buy The Property
If everything checks out, the pros outweigh the cons, and you’re confident you can get the project completed and turn a profit, it’s time to put in an offer.
You can buy foreclosed properties from:
- Through Auctions
- From The Homeowner
- From The Bank
- From The Government
Before you go in and make an offer, understand the max offer you can make and still turn a profit.
Then, if the offers (or competition) get any higher than that, you can back out and start looking for other foreclosed properties to make offers on.
Knowing how to tap into foreclosed properties is one of the best ways to grow your real estate investing business. Especially in today’s competitive landscape where home prices are constantly rising.
If you follow the steps we’ve laid out in this guide, you’ll be able to start finding these prime opportunities.
Then, make sure you’re staying organized so you’re not wasting time, money, and energy or letting potential deals fall through the cracks. If you haven’t already, click here now to start your free REISift trial so you can stay organized and use it as your competitive advantage in your local market.