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How To Find Foreclosed And Bank Owned Homes

Article writer - Emme  image

Finding foreclosed and bank owned homes from newspapers, bank websites, government websites, real estate agents specialized and more learn how to to find these investment properties.

As an investor, it may be intimidating to come across various elements of bank owned properties, such as liens, expensive reconstructions and complicated negotiations. In fact, investing in REO properties is a highly misinterpreted aspect of the real estate investing market. However, purchasing a foreclosed property gives you the benefit of bargaining for a reasonable price, which may include impressive upfront discounts. So, now that your interest in an REO property has escalated, your foremost job is to find bank owned properties. The following lines will guide you in finding REO properties so that you can make a worthwhile real estate investment.

What Is REO Or Real Estate Owned Property?

Simply explained, an REO (real estate property) can be described as that residential/ commercial property, which has been repossessed by a mortgage lender or a bank. This reclaiming process is simple and straightforward. Whenever any property owner is unable to fulfill the mortgage agreement, the lender may commence foreclosure proceedings on the property for recovering their loss. In case the property fails to sell at the auction, or if the lender happens to be the highest bidder, the ownership goes to the lender. As soon as the property becomes REO, the mortgage company or bank begins preparations for selling the property in the real estate market.

How A Property Becomes Bank Owned:

It may seem that buying an REO property is scary, but that is not the case in reality. The REO property is like any other property, except technically it is owned by either a mortgage company or a bank.

Customer-owned properties turn into bank owned properties because of a default on the loan. Generally, a property becomes REO in 3 distinct stages. You can get an idea about these stages in the lines below.

Stage 1: Payment Default

This is the initial stage in which the property owner (or borrower) fails to pay one or more mortgage payment. When the borrower misses the second mortgage payment, they are issued a notice called the "Demand Letter". Once 90 days have passed since the missed payments, the borrower is sent a "Notice of Default". Sometimes, the lender offers a reinstatement period to the property owner- a timeframe of extra 90 days- for restoring the loan and resolving payments.

Stage 2: The Auction

The foreclosure auction, also called "Trustee's Sale", is a public auction that puts the property on sale. The minimum bid is equal to the overall outstanding amount of loan, which includes all fees related to the foreclosure auction and accrued interest. When the auction is over, the confirmed winner is provided with the Trustee's Deed Upon Sale. The purchaser can now immediately possess the property.

Stage 3: Becoming A Part of The REO Class Property

If the property does not sell at the end of the foreclosure auction, it will automatically turn into a real estate owned property. The bank, during this stage, will try to sell the REO property, generally with the help of a broker. In this process the property is prepared for sale, the liens and occupants are removed, and the price is determined. Remember, a mortgage company or bank has its own unique rules on selling REO properties.

While investing in a bank owned property can be beneficial, you should also have an idea about the associated risks. So, before you think of buying an REO property, you need to have your due diligence conducted and learn all about bank owned properties. Such preemptive measures can help you avoid risky deals, and invest in the right ones.

Finding Bank Owned Properties

Now, moving on to the most important part of this article- how to find bank owned properties. Well, the quickest method is to get in touch directly with a lender, and place a request for all the available REOs for sale. Sometimes, the lender is equipped with an REO/ asset management department dedicated to handling such real estate properties. This will ensure an easier process for you as an investor. As mentioned earlier, due diligence plays a crucial role in helping you find the best REO property deal. So, gear up properly before taking your first step.

In the following lines, you will learn about the various resources that you can use for finding bank owned properties. Make sure that you go through authentic and proper channels, so that you don't end up losing any of your hard-earned money.

Look For Bank Owned Properties In Various Categories- A good way to find bank owned properties is by searching for properties categorized in different stages of foreclosure.

1. Pre-Foreclosure Property

A property falls in the pre-closure stage when the borrower (owner) has failed to make the payments and has been served with foreclosure notices. Generally, such properties are listed as short sales on the real estate market. However, successful negotiations followed by close sale is pretty challenging in this case. If you are somehow interested in buying a property in pre-foreclosure stage, you need to first visit the website of local county records. Next, look for documents types that fall under "Notice of Trustee Sale" category (listed in the previous 2-3 months). Every result will show you a property for which foreclosure notice has been served. It is this notice that will mention the property and the bank holding its mortgage. Contact the bank/ mortgage company if you are eager to buy the property.

2. Unlisted Bank-Owned Property

If a bank has already repossessed a property, you stand a better chance to negotiate for purchasing the property. There are, however, sometimes when the property does not get listed ( on MLS) despite being foreclosed. This is because of certain issues associated with the property, such as multiple lenders claiming the property or ongoing eviction. You may want to avoid properties with such issues.

3. On-Market Bank-Owned Property

The most reliable and easiest method of finding bank owned property is through Multiple Listing Service or MLS. You need to patiently wait for the property to get listed, and then move ahead with your purchasing decision. However, if you want to invest in a property that has reached this stage, you will most likely miss out on an impressive deal. But that also means that you will not have to face any problems related to multiple banks or evictions.

4. Find Bank-Owned Property In Distressed Neighborhoods

A good way to come across bank owned property is by searching for distressed neighborhoods. However, there are some distressed properties that require extensive repairs. Deciding to drive through any such distressed neighborhood will give you the advantage of first-hand inspection of the property. Here's what you need to do before you drive through any distressed neighborhood:

Secure Address

The owner of the property retains the right to their home even when it is going through foreclosure. You can look for the targeted property and secure their address as well as get access to information on the local assessor. All this will help you learn about the property owner and get in touch with them.

Contact for offer

While not many are in favor of unsolicited offers, a distressed property owner might not have an objection. Since they are mostly under stress, an offer from you end, even for short sale, might be received positively by a distressed property owner. Send mails to all the leads that you come across ( in the past 2-3 months), and show persistence if you want a profitable investment.

The Mailman

The mailman has the best knowledge about any distressed neighborhood property. This is because they know all about the door notices and filled mailboxes. You can build a liaison with the mailman and offer some reward to them if you want to gain information about any distressed property in a neighborhood.

Get To Know The Neighbors

Of course, the neighbors will definitely have some idea about any distressed property in their neighborhood. There are several distressed properties that don't appear very attractive, driving down the property value. But getting to know the neighbors and handing them your business card will help you dig out a lot of helpful information.

5. Local Newspaper For Finding REO Properties

The most effective way to get access to REO properties is by finding the property as early as possible. You can reach out with your offer even before the property gets listed. This tactic is mostly overlooked, but it save both money and time for the bank and you (the investor). The local newspapers can prove highly beneficial in helping you find properties at this early stage. This means that you have to scan all the local newspapers as frequently as possible (daily, if you can), to track such REO properties. Look for the classified ads section in the local newspapers to save some time.

6. Taking Help From Prominent Banks Websites

Living in today's technologically advanced world is a big advantage when it comes to finding bank owned properties. The Government as well as the private sector make the most of the Internet to provide information on REO properties to interested investors like you. Take a look at the various online resources that you can use to find bank owned properties that are available for purchase.

7. Government Websites For Buying REO Properties

You can log on to HUD.gov to find all foreclosed properties that have been listed by FreddyMac, Veteran's Affairs or FannieMae. All the properties displayed on the search results are put on direct sale by the Federal Government. Realtors handling the transaction on behalf of the government may also advertise these properties.
Find Foreclosed Properties on Bank Websites- You can also find REO properties that are foreclosed by Citibank on CitiMortgage.com and Bank of America on BankOfAmerica.reo.com. Other banks also provide similar websites, which you can search by typing "reo" or "foreclosure" along with the bank name. You may even find some local banks in the search results.

8. Visit Leading Real Estate Websites

All the leading real estate websites like trulia.com, Realtor.com and zillow.com provide information on foreclosed properties for sale. You can also consider joining RealtyTrac.com to get access to the most updated information provided by various sources on REO properties. However, it may take some time to get contact information of the REO properties you are interested in, from RealtyTrac. Another online marketplace where you can get all information related to foreclosed properties is AssetColumn.com. This website provides information on nationwide real estate deals including REO properties.

9. Hiring A Real Estate Agent Specialized In Foreclosed Homes

Working with a real estate agent specialized in foreclosed homes, is not a compulsion for you. However, you will not profit a lot by getting things done on your own. Real estate agents who specialize in REO properties have professional experience in handling such deals. They can help you find bank owned property deals that will profit you greatly. In fact, a real estate professional who is licensed can provide you access to the MLS data. This is a huge advantage as only real estate agents can access the MLS data. You can look by area for REO or foreclosure properties using the MLS systems.

Several real estate agents establish good and healthy relationship with such banks (dealing with REO properties). Hiring a real estate agent will help you find out about those listings that are yet to come on a list. The real estate agent you hire can also provide you with other useful information about the listings database that will give you the opportunity to make your investment a profitable one.

Pitfalls Of Buying A Foreclosure House

While it is fine to invest in an REO property, there might be some risks associated with such property that you would want to avoid. The main pitfalls of buying a foreclosure house include the following:

1. Negligent Inspection

In case the inspection is unable to throw light on any extensive damage until after you have bought the property, you will need to shed extra money for repair. Losing money in reconstruction or repair will surely make you lose the profit you expect from the purchase.

2. Title Issue

Another problem that might shoot up is the title issue, which may remain undisclosed even after performing title search before buying the foreclosed property. If this is the case, then you would be required to have owner's title insurance policy so that you can protect the investment if any title issue stems up in the future.

3.No Guarantee

Of course, no one can guarantee how well the investment will be for you. It is possible that despite your thorough market research, the property's resell or lease value does not match your expectations. If that happens, you can kiss goodbye to any profit you might be expecting from the property.


Looking for foreclosed properties is the first step towards buying REO properties. However, it is important that you find bank owned properties using the right resources, each of which has been described in this article. Once you find the foreclosed property of your choice, you can move ahead with the buying process. Buying an REO property can be a smooth and profitable venture for you. However, you need to equip yourself with proper knowledge and guidance. As a beginner, simply learning the way real estate owned properties work will help you overcome your fear. Putting in effort, knowledge and time will help you to navigate with ease through the real estate sector. It will also ensure success in your real estate investment.

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