Whether you’re purchasing your first home or expanding your real estate portfolio, a foreclosure may provide an excellent opportunity. This type of property often comes at a fraction of market costs, but without the right preparations, it can be a risky investment. If you aren’t familiar with foreclosed properties, use the following guide for more information.

A Brief Introduction to Foreclosures 

What does foreclosure mean?

A home goes into foreclosure when the homeowner can no longer make mortgage payments. They then turn over the property to the mortgage lender, who then sells it to cover the outstanding balance on the home.

How are they sold?

real estateA mortgage lender sells the home at a real estate auction, which is sometimes called a trustee sale. If you’re interested in buying, you’ll need to attend and make a cash offer. Bids will generally begin at 20% lower than the assumed market price.

While paying cash is preferred, you may be able to secure a mortgage from a bank or lender that you can put toward the foreclosure. There are also government-sponsored options, including 203(k) and Federal Housing Administration loans that you can explore with an agent and lender.

What are the risks?

Often, when owners default on their loan, they’ve also put off repairs and other maintenance. There can be mold, foundation cracks, poor wiring and plumbing, and other significant issues that aren’t always visible.

When buying a foreclosed property, scheduling a home inspection is a must. You’ll know exactly what you’re getting, and if you plan on renovating, a contractor can provide an estimate for getting the house back in shape. You may also inherit hidden costs on the home, including liens and back taxes, and you’ll have to settle these before buying.

Do you need a real estate agent?

An agent is well-versed in purchasing foreclosed properties and will help you streamline the process with lenders. They’ll connect you with preferred home inspectors and know common the problems to look for. An agent is also familiar with the market, so you’ll get the best value assessment of the property.


Looking for a real estate agent? Big Journey Homes – Lauri Bauman is committed to helping owners and sellers fulfill their property goals. She represents clients throughout Denton, Lake Dallas, Frisco, Flower Mound, Argyle, McKinney, and Corinth, TX, and is committed to achieving the best outcome from every transaction. Begin exploring Texas homes for sale on her website or call (940) 321-5111 for more information. You can also text her at (214) 566-1088.