General, How to Find Deals

How To Find Foreclosures – The 5 Best Ways

Published Thursday, April 15, 2021
By Kevin Amolsch
Buy foreclosure

How To Find Foreclosures – 5 Surefire Ways

“Kevin, you have to help me find more deals!” One of my best clients complains to me over a beer. He is still closing one or two deals a month but nowhere near what he is used to doing. The deals are just harder to find, period. If you want more deals, then you need to discover more ways to find them. Foreclosures can be an excellent source of leads.

Pros Of Buying Foreclosed Homes

Although there are some risks, there can be considerable upsides to foreclosure buying. 

Lower Acquisition Costs

By finding foreclosures on your own, you are eliminating the costs of professionals helping you locate deals. And depending on how you buy the foreclosure, you can eliminate the closing costs altogether. You can purchase foreclosure properties before the foreclosure auction, at the foreclosure auction, or after. In any of these cases, you can reduce costs by representing yourself. 

Lesser Issues With The Title

Issues with the title usually are less of a concern if you get title insurance, but occasionally liens can show up on the title, which you will need to handle. If you buy a foreclosure after the auction, the title should be clean since it eliminates most liens. I still recommend getting title insurance to protect you against any potential issues down the road. 

May Use Regular Mortgage Financing

If you purchase a foreclosure before or after the foreclosure auction, you can do so with any type of financing you want. Buying at the auctions can be a bit more challenging as most counties require that you pay cash.

Potential To Profit From Improvements Made

The potential profit is the most significant upside to buying foreclosures. You should expect a discount with the ability to add value by making repairs. If you find a foreclosure that needs a lot of work, your upside will be higher. Nearly all foreclosure properties will need some kind of work since the prior owner did not care about the property or did not have money to make necessary repairs. 

Drawbacks of Buying Foreclosures

Although there is a tremendous upside, there are some downsides to buying foreclosures.  

Higher Risk Involved

Because there has been a lack of maintenance, it is common for a real estate investor to find issues with the home after they buy it, which could not have been seen during their inspections. Also, if you decide to start bidding at the foreclosure auctions, you may not be able to get inside the property to inspect it at all. These properties are typically purchased in as-is condition, so be sure you understand what you are getting into.

High Demand And Competition

Because foreclosures are public record, many real estate investors track these and try to purchase them. This high level of competition can drive prices up, especially at auctions. Since these auctions are almost always conducted live, emotional investors will bid up properties and overpay. 

May Have Hidden Costs

If you are buying before or after the auction, you will have time to review a closing disclosure or settlement statement. This statement will detail all the costs which you will want to be sure you understand. When buying a HUD home, for example, HUD charges a fee added to the purchase price. Such fees are also added on many of the auction sites. There are also risks of city assessments and fines that will need to be settled, so keep an eye out for that no matter how or when you choose to buy.

Slower Closing Timeline

Except for buying at the auction, scheduled closing dates can be delayed. Most foreclosures have larger banks either as the owner or the lender and can get back up. Especially in times with high foreclosure rates, you will see banks take weeks to respond to requests. Just stay patient and close when they are ready.

How To Find Foreclosed Homes

Again, depending on when you plan to buy, there are several ways for you to locate your next foreclosure purchase. 

1. Dig Through The Internet

The internet should be your first stop when locating foreclosures. Here are some examples of how you can use the internet to help you with your search.

Foreclosure Listings Of Banks

Some banks list their foreclosure inventory right on their website. I would call around to small local and larger banks and ask to speak to the REO department. From there, you can ask if they have any inventory and if they list them for sale on a specific website. While you are on the phone, be sure to tell them what you are looking for and ask them to call you if they find something. The truth is, banks offer deals to people they know long before those deals hit any website. 

Fannie Mae Online Listings 

Fannie Mae is the largest buyer of mortgages in the country. Supported by the government, their main goal is to create liquidity in the market by being a buyer banks can rely on. For this reason, they are also a large owner of foreclosed homes. 

Although they prefer to sell their homes to owner-occupants, they will sell to investors as well. They even claim to auction houses off if they are not getting buyers in the open market. You can get more information about their current homes for sale and how it works here

Freddie Mac Online Listings

Freddie Mac is very similar to Fannie Mae and is a large buyer of mortgages. They, too, have housing inventory they sell in the open market and will occasionally auction homes off. Get more information about them here.

2. Search Government-Owned Listings

Fannie and Freddie are the largest buyers of mortgages, but HUD is the largest loan insurance, provider. All FHA loans have HUD provided insurance in place. Part of a loan insurance provider’s responsibility is to buy troubled FHA notes or properties from lenders it insured. In these cases, the government will end up owning the home. We call these HUD homes. Every HUD home was an FHA loan gone bad. 

Department Of Housing And Urban Development

Like Fannie and Freddie, HUD prefers to sell to owner-occupants but will sell to investors after owner-occupied buyers have had an opportunity to make offers. HUD homes are listed with agents, so the best way to find the best HUD homes is to network with HUD listing agents. Any agent can help you find an offer on HUD homes; however, they need to be registered with HUD to present offers. Get more information on HUD homes here.

3. Visit County Offices Or City Courthouses

I know many investors who visit the county courthouses and sift through files since not all counties list up-to-date foreclosure information on their site. That is becoming rarer, however, now that you can get most foreclosure information from county websites. If you invest in a deed of trust state, the process is for the county trustee to auction the home off, so in those states, you will want to visit the county Trustee site to get the foreclosure information. 

Auction.com is another excellent way to see upcoming foreclosure auctions and what is potentially going to be auctioned off. Auction.com is a good way to locate potential deals, but you will still need to work directly with the county to make the purchase. 

4. Local Newspapers or title companies

Sounds crazy, I know, but foreclosures are still published in local papers. These papers generally come out once per week. Checking local papers is a great way to locate homes that are just entering the foreclosure process so you can reach out to the owner directly, or you can track them and bid on them at the auction. 

If you are lazy like me, you might prefer to get foreclosure lists. Some title companies get these lists and send them out to their clients for free. These lists include all the properties that have entered into the foreclosure process, making it easy to put together mailing campaigns to owners or start to try to track them down to call or knock on their door. Ask the title or escrow company that helped you with your last real estate closing if this is a service they can provide. If you are brand new, a reputable real estate agent should know how to get these lists. 

5. Pay For The Information

Although I like getting information for free, sometimes it makes sense to pay for it. Foreclosure lists are a great example.

Real Estate Websites

Many real estate websites have search features where you can input keywords, like “foreclosure.”  Some real estate websites that focus on foreclosures charge subscription fees but provide the most current and accurate information on foreclosures you can get. Title companies pay for these lists, so getting them directly from the listing provider could give you a decent head start contacting owners. A great example of a site like this in Colorado is www.renav.com.

Multiple Listing Service (MLS)

Virtually all foreclosures that go back to the lender end up on the MLS. The idea of investing in foreclosures is to get away from your competition, who are all looking in the MLS, but it is still a great idea to keep your eye here. We still see a fair amount of deals in the MLS. You can stay on top of these by working with real estate brokers that understand real estate investing, and that can set up filters so you are notified of new listings and price changes. You can also set up your own filters with websites such as Zillow and Redfin, which get all their data from the local MLS.

Independent Real Estate Brokers

Agents are still a great way to locate foreclosure properties. They get involved in foreclosures both before and after the auction. It is best to network and find the agents getting the REO listings, but all agents can search for homes and make offers for you. 

 Agents do a lot more than search the MLS, though. Often, the good ones will market to homeowners for listings and reach out to their investor clients when they contact sellers wanting to sell. They also network with each other and get word of listings before they hit the market. 

My recommendation for working with agents, however, is not to sign an exclusive agreement with them. Agents know I am a legitimate buyer and will bring me deals without that agreement. If they have a deal I like, I sign a buyer agreement with the agent for that one property. If an agent is insistent on an exclusive agreement, they don’t understand this business well enough to know that you need multiple agents on your team, just like they need to work with various buyers and sellers. If an agent does bring you a good deal, then close on it. I also suggest giving them the listing if you plan to resell it. That shows loyalty and is an incentive for them to bring you more deals. And it is just the right thing to do.  

Are Foreclosed Homes The Way To Go?

Foreclosure investing is a massive topic with multiple ways to get involved. Buying at the auction can be risky while buying before or after can limit your risk. You can find good deals at any stage of the foreclosure process. You must focus on one or two ways to go about your foreclosure investing and become very good at that. It is also wise to build a team of qualified and experienced people around you. Let us know what we can do to support your foreclosure investing business.

Interested in exploring options that work for you? Let us help, consult with us today!