If a homeowner falls behind on his mortgage payments, the mortgage lender can take the house back and evict the residents through a process known as foreclosure. Once a lender forecloses on a property, it will try to resell the property to recoup its losses resulting from the defaulted home loan. Buying a foreclosed property can often save the buyer thousands of dollars, because lenders seek to unload foreclosed properties quickly to minimize their monetary losses.
Find a property you want to buy. You can search for foreclosed condominiums in the newspaper, at your local clerk of court’s office, through mortgage lenders or through online databases such as RealtyTrac or Zillow.
Apply for financing. Contact several mortgage lenders to shop around for the best rate; the multiple credit inquiries caused by filling out multiple applications in a one or two-month period will not adversely affect your credit score, because credit bureaus allow consumers to shop for the best rates.
Contact a real estate agent or real estate attorney with experience dealing with foreclosures. An agent or attorney will make sure all parties to your transaction are on the same page and will help guide you through the process of buying a foreclosed property by managing the paperwork and meetings required to complete your purchase.
Research the title to any properties you are interested in buying. The title is the chain of ownership of a property, including any liens or judgments that have been placed on the property due to actions of a previous owner. Pursue only properties with a clear title, because you can be held responsible for any financial obligations attached to the property once you buy it; your attorney will help you research the title of potential properties and explain the results to you.
Hire a professional to inspect the property, if possible. For a fee, a home inspection firm will perform a thorough check of the condition of the property and will report any defects, damage or potential problems. If the property is selling at an auction, you will probably not be able to have it inspected, because you will have to pay the full price in cash upon making a winning bid.
Contact the lender that foreclosed on the property and make an offer. If the item is up for public auction, attend the auction and bid on the property up to the maximum amount you are comfortable spending. Whether foreclosed properties are offered at public auction or sold through the foreclosing lender depends on the circumstances surrounding each foreclosure as listed in the foreclosure database, as well as the laws of your state. Contact an attorney if you are unsure how to make an offer on a property you want.
Pay the auctioneer or the lender any required amounts. You must usually pay in full at the time of winning a bid at auction. If you buy through the foreclosing lender, your lender will transfer the money to the selling financial institution, less the amount of your down payment as required in your financing agreement.