Buying a foreclosure is not easy. You may get a fantastic price, but it takes a lot of time to find just the right property. Most foreclosures are real estate owned (REO) properties. They are owned by the lender, usually a bank, HUD or Fannie Mae as a result of the previous owners default on the loan.


Common ways to purchase a foreclosure is through a public in-person auction or an online auction or from If you have never purchased a home before it is a good idea to have a real estate agent that is experienced with foreclosures guide you through the process. They can assist you in negotiating the purchase price and terms of a foreclosed home but it may take a little longer than a typical real estate transaction. We  are registered HUD Broker so we can help you with your bid.

A public foreclosure auction can occur when ownership of the property officially goes back to the bank. Typically the property is listed with a Realtor©,  a sign will go up on the property and you can purchase the property through your real estate agent.

Online auctions are tricky and not for the novice. Often homes are listed at a very low price in order to pull the buyer into the bidding on the house. There are fees involved that the buyer must pay above the purchase price. So if you are investigating an online auction, read the fine print. A large earnest money deposit is often required before you can start bidding. These auctions happen fast and you may not have time to inspect the property, or it may still be occupied. You may have to rely on photos and printed descriptions.  Do your research and set a budget before you attend an auction. Whether it is online or in person, if you win the bid, the seller expects to close on the house.

Other things you should know are foreclosures homes are sold “AS IS” and it’s going to be up to you, the buyer to pay for repairs. This can be tricky if the house has a lot of work to be done. Banks or lenders want to sell these properties quickly. You will need a preapproval letter from a lender or bank proof that you have the cash to purchase the home before a seller will accept an offer. Getting prequalified will tell you how much home you can comfortably afford.

Because the property is a foreclosure, the seller will have no first-hand knowledge of the condition of the property. Therefore it is up to the buyer to determine the property’s condition. This can be done through a professional home inspection. They will make a list of everything that needs to be fixed, then you can research the costs with a licensed contract, and factor in those costs to any offer you make to ensure you could cover the costs on top of your new mortgage payment.

You will also have other pre purchase expenses which may include an appraisal and earnest money or ‘good faith’ deposit to demonstrate your sincere interest in purchasing the home. As with a typical real estate transaction, out-of-pocket expenses can occur before and after an offer to purchase a property has been submitted. These out-of-pocket expenses may include lender required documentation such as an appraisal or home inspection and bank-required minimum earnest money.

A good mortgage lender will tell you about all the loan products available for this type of transaction, including traditional loan products or an FHA 203(k) Renovation Loan. This is a mortgage that provides the purchase price plus funds for renovation by financing the “as improved” value of the home.

Most foreclosed homes are listed for sale with real estate agents the same way as traditional homes. However, in addition to searching through REALTOR.COM or ZILLOW.COM, or you can do an online searches for “REO properties” or “foreclosures”.

Always request a title for any real estate transaction. A title company will check the property for liens (outstanding debts someone is attempting to collect against the property) as well as verify that the deed to the home is correct. In Alabama there is still a previous owner’s right of redemption, meaning that with payment to the lender, they can reclaim their home within a certain time.

You are the only one that can decide if buying a foreclosed home is a good match for you. Do your research and work with qualified professionals to help you make the right decision.

At Azalea Real Estate in Grand Bay we can help you from search to closing. Visit  to search for homes or contact Aleta Boudreaux REALTOR© at 251-656-4576 for more information on purchasing or selling your home in South Mobile County.


©Aleta Boudreaux, 2019