When it comes to buying a foreclosed home, you have three paths to choose from: buy one directly from the owner in a short sale, bid on it at a foreclosure auction or purchase one from a bank as a real estate-owned (REO) property.
Foreclosure filings rose 21% year over year in the first half of 2026, according to ATTOM's Mid-Year 2026 U.S. Foreclosure Market Report, meaning more distressed inventory may be reaching the market.
However, each purchasing path comes with different steps, risks and potential costs. Here's the basic process for buying a foreclosed home.
1. Get preapproved for a home loan
A mortgage preapproval is vital to show that you're a serious buyer who can afford the property. That can be especially important with foreclosures, which often attract real estate investors, who tend to pay cash. A preapproval letter helps show that you can compete with cash offers and follow through on the purchase.
If you’re making an offer on an REO or a Fannie Mae HomePath property, you’ll generally need to include your preapproval letter with the offer. And if you’re buying a HomePath property as your primary residence, a HomeReady mortgage may allow you to put down as little as 3%.
2. Work with an agent who knows foreclosures
Buying a foreclosure that's on the MLS is similar to the traditional process of buying a house. However, dealing with an auction, figuring out how to make an offer on a home that's in pre-foreclosure, or navigating a short sale can feel disorienting even if it's not your first time buying a home. A buyer's agent who has experience helping buyers purchase foreclosures can be a major asset.
3. Search for foreclosed homes near you
You'll see properties that are marked as foreclosures or pre-foreclosure on the MLS and real estate listing websites that pull from the MLS. But that's not the only place to find foreclosures
Auctions
Auctioneers are legally required to post notices of sheriff's auctions prior to the sale. This means there's a sign on the property and, perhaps more easily found, a notice in the local newspaper, which includes on the paper's website. Some cities and counties host larger auctions, which may include empty building lots or former municipal buildings.
Government websites
Government agencies and government-sponsored enterprises sell foreclosed homes. This includes Fannie Mae, Freddie Mac and the Department of Housing and Urban Development (HUD). Fannie Mae lists its repossessed homes on HomePath.com, while Freddie Mac uses HomeSteps.com. HUD sells FHA-insured foreclosures through the HUD Home Store.
Borrowers who plan to live in the home may also be able to take advantage of Fannie Mae's First Look period on HomePath, which gives owner-occupants a 20- to 30-day window to make an offer on eligible Fannie Mae homes before investors can bid.
Home auction websites
Websites that specialize in home auctions, like Hubzu and Auction.com, feature foreclosed properties. These platforms typically charge a buyer’s premium as part of their auction-related costs. Hubzu, for example, charges a technology fee and a buyer’s premium as part of its auction-related costs. Auction.com charges a buyer’s premium on certain properties, typically equal to 5% of the winning bid or $2,500, whichever is greater.
🤓Nerdy Tip
Since exact charges vary by platform, property and seller agreement, make sure to review the individual property listing for specific fees.4. Make a competitive offer
Work with your agent to get an idea of comparable home prices so you can make a smart offer that fits your budget. After all, in a live auction situation, you definitely want to know your limit. If you're buying a home that's been bank-owned for some time, you'll still want to be strategic.
In a hot real estate market, you may need to offer the full asking price. But even in a more balanced market, a low-ball offer may not fly. The bank may already be asking what it considers to be fair market value and be unwilling to go lower. With an auction site, you may need to meet a reserve price for your offer to be considered.
» MORE: How to make an offer on a house
5. Prepare for potential difficulties
As with any home sale, it's in all parties' interests to keep things moving smoothly, but buying a foreclosure can be a bumpy road. For example, short sales require the lender's approval, which can take extra time.
Many foreclosed homes are sold "as is," meaning you can't request repairs. That's OK if you can get a home inspection, but in some situations — like a sheriff's sale — you may not have that option. You also won't have the previous homeowner's disclosures to rely on. If there's a listing agent, they may have limited information to answer any questions.
A house with a low upfront price may cost you dearly once you move in, especially if it hasn’t been occupied in a while, and it can be difficult to finance extensive home repairs with limited equity. If you're considering buying a foreclosed home that's a fixer-upper, you may want to get a renovation loan like a 203(k) loan to finance your repair costs.
Frequently Asked Questions
Is it cheaper to buy a foreclosed home?
It can be. Foreclosed homes are sold as-is so they may be priced below comparable properties. Keep in mind the home could need significant repairs or renovations so consider those costs before deciding whether it’s actually a better deal.
Can you get a mortgage on a foreclosed home?
Yes. If the home is an REO property listed on the MLS rather than a courthouse auction you can get a mortgage. An FHA 203(k) loan allows you to roll the costs of approved renovations into your mortgage, which could be worth considering if the home is a fixer-upper.
How much do you have to put down on a foreclosed home?
A traditional mortgage like a conventional or FHA loan may allow down payments as low as 3%. If you buy the home at a live foreclosure auction, you may need to make a winning bid deposit, which is typically 10% of the purchase price, and pay the remaining funds within a specified number of days.
How long does it take to buy a foreclosure?
REO properties typically take about the same amount of time to close as traditional sales, which is around 43 days, according to Freddie Mac.
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