HOW TO BUY A FORECLOSED HOUSE: Steps to Buying a Foreclosed House

how to buy a foreclosed house
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Want to know more about foreclosure or how to buy a foreclosed house? This article centers on the meaning of “foreclosed house” and how to buy a foreclosed house at auction, from the bank, with no money down, and in California. We will also be discussing the following: short sales, bank-owned, pre-foreclosure, repossession, bankruptcy, and realtors.


The word “foreclose” was gotten from an old French word known as “forclos”, and is also called “forclore,” with the Latin meaning (for) as outside and (clore) as close.

To buy a foreclosed house, the lender should legally (foreclose)the property from the borrower. Before we proceed, let us know the meaning of foreclosure and other discussions of the following stated above.


Foreclosure can also be known as foreclosing or foreclose, meaning preventing or stopping someone or something from escaping or barring them from doing something. It also means the process or act of recovering debt or taking possession of a person’s properties as collateral if the borrower fails to pay the debt when due to settling the debt.

It is an involuntary process whereby the lender legally does anything to the house/property without permission from the borrower. Foreclosure is done at a public auction. Before a foreclosed, it must complete a foreclosure process. It might last for 120 days depending on the state/area.


A foreclosed house is the past tense of foreclosure. The property(mortgage) owned by the borrower has legally been possessed by the lender. If the borrower fails to pay the debt at the excepted time.

If nothing is done to pay off your debts, the house or mortgage will legally become the lender’s property. That is when the property is foreclosed.

Short Sale

A short sale is an agreement approved by both the borrower and the lender so that the borrower can sell his/her mortgage.

It is also a voluntary process that allows the borrower to sell the properties at a lower price than the amount owed to the lender.

Any transaction made on the mortgage belongs to the lender. And the borrower still has more to pay if the lender wishes.


It is the first phase or step that the lender uses to claim the property of the defaulted borrower. It is a notice the lender gives to the borrower to obtain the money owned before the foreclosure. That is if the borrower fails to pay the specific amount of money at a specific time.

In pre-foreclosure, the lender can let the borrower make a payment or negotiate to get out of pre-foreclosure.

Bank Owned

Bank-owned means a property(house) that is already foreclosed by the borrower or bought back by the lender if it was put on public auction and wasn’t sold after foreclosure. The bank, which has another name as real estate owners, becomes the bank’s own, and the bank maintains it. Bank-owned is out on competitive prices through realtors to recover their initial investment. The mortgage loan on the property no longer exists once it becomes the bank’s own.


It is a request form to postpone or save the borrower from foreclosure through a reaffirmation agreement. The agreement should include that the owner still has possession of the property and that the owner should make the payments on the loan to the lender on an agreed day to avoid foreclosure.

There are two types of bankruptcy namely;

  • Chapter 7
  • Chapter 13

In Chapter 7, the borrower is to obtain a discharge form for all or most of the debts till further notice from the court. While chapter 13 allows borrowers to gain a form that allows them to have some time to settle the debt. It can be 3 to 4 months, or 3 to 5 years, depending on the agreement between the court.


When a house or mortgage is in repossession, it is when a defaulted borrower can’t pay up the debt at the due time. It is a legal process to possess the borrower’s mortgage after foreclosure is already complete. It is one of the consequences of foreclosure on the borrower.

During a foreclosure process, the borrower still stays until the foreclosure process is over/complete. Which will take some days depending on the area/state.

After that, the lender offers an eviction letter that has approval from the court to the borrower, to evict the house. After that, the lender repossesses the property.

How to Buy a Foreclosed House.

These are the following steps or procedures to consider if you want to buy a foreclosed house:

  • You can buy a foreclosed house in a short sale, at an auction by the lender, or through a very good real estate agent(realtor) that is into it.
  • You can do research and look into financing options for the foreclosed house you want to buy.
  • It is good to look into loans from the FHA(federal housing administration).
  • Using a government-backed or conventional mortgage
  • Don’t look at the property’s desirable purchase price because it can be bargained.

How to Buy a Foreclosed House at Auction.

To buy a foreclosed house at auction you need to know a few procedures stated below;

  • Do your research on where they are doing auction bidding.
  • Find and track the foreclosed house auction site.
  • Confirm all auction details before the time comes.
  • Get your financing in order to buy the foreclosed house at auction.
  • On the day of the auction, go to the venue and do your bidding.
  • Go to the property and be ready to see the condition of the house in a quick process if possible.
  • Collect all the necessary documents concerning the house to identify you as the owner of the property(certificate of ownership/title).

How to Buy a Foreclosed House From the Bank

To buy a foreclosed house from the banks. Here are steps to consider in buying from the bank stated below;

  • Do research on banks that deal with or have a foreclosed house you want.
  • Then you sharpen your bargaining skills and start with a low-ball offer on the property you want.
  • Get your money ready and start your negotiations with the bank for the property. If you want to buy a foreclosed house from the bank,
  • The longer the property is in the hands of the bank, the lower the offer price you will negotiate.
  • To buy a foreclosed house from the bank, you can start your bidding with at least 20%, even below the current market price, or more if it is located in an area with high foreclosure houses.
  • Finally, you can buy a foreclosed house from the bank by paying cash if you see what you want and can afford it. You inspect, and you do any necessary renovations.

How to Buy a Foreclosed House With No Money Down

So as not to miss out on your investment in foreclosed property. This is the viable option to use to buy a foreclosed house with no money down as stated below.

  • First, to buy a foreclosed house with no money down, look for a distressed house around you. Especially in the area where you want to buy.
  • Meet with the mortgage lender that is foreclosing.
  • Also, meet the homeowners if the lender agrees with your plans to buy the foreclosed house with no money down.
  • Having the necessary criteria Like aiming for the FHA (federal housing association) or getting the FHA 203(k) renovation loan, using a credit card, etc.
  • The agent/lender writes up an agreement to purchase with an addendum for loan assumption.
  • Getting approval from the mortgage lender that you want to buy a foreclosed house
  • Close on the purchase with the company ownership or title office with the lender to become full ownership. And then you have the property with no money down.

How to Buy a Foreclosed House in California

These are the following steps to take if you want to buy a foreclosed house in California:

  • Do some research on the foreclosed houses in California online or in person.
  • If you want, you can find a real estate agent to help you buy a foreclosed house in California if you want.
  • Appraise the market value of foreclosures in California.
  • Make an offer/bid or submit them.
  • Get pre-approval for the mortgage on the foreclosed house you want to buy.
  • Secure the properties you have got and, finally,
  • To buy a foreclosed house in California, you have to close the sale (certificate of ownership/title) after purchase.


A realtor is a person that acts as an agent for the sale and purchase of buildings and land as an estate agent. The realtor deals with buying a foreclosed house.


A house is a place or structure for human habitation. It can be a place for the rearing of farm animals and doing other activities like office work, e.t.c., which also consists of a ground floor and a ceiling of one or more stories.


In a short sale, not all lenders accept it because they might have a loss. So, to avoid short sales, the borrower can sell the property at a higher price before the day of the foreclosure. If you don’t want that option, then you can give your property in deed-in-lieu of foreclosure, even do a bank-owned.

But the better way is to do a bankruptcy to postpone the foreclosure. If the foreclosure is to follow again after bankruptcy, the sheriff’s sales and the trustee’s sales take place.

How to Buy a Foreclosed House FAQs

What is the difference between foreclosure and foreclosed?

A foreclosure is a legal process that the lender uses to claim the property of the borrower if they fail to pay the debt at the due time. A property is foreclosed when it has undergone a foreclosure process, which can take up to 120 days.

Can you negotiate price on a foreclosed home?

Borrowers can negotiate the price if the lender allows and can let the borrower do a short sale.

Why do lender prefer foreclosure to short sale?

In a foreclosure, it costs the borrower more and it always favors the lender, whereas if they should do a short sale, the lender will not gain interest and the sale can be shared equally.

Does lenders want you to foreclose?

No lender doesn’t want to foreclose on your property, but if you do not meet the accepted agreement, then the lender will foreclose on your property.

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