It does happen from time to time, and may seem like a real bargain. If you plan to explore below-market opportunities, it is important to know the difference between a foreclosure and a bank-owned property.

In a foreclosure, there is usually a grace period prior where you can view the property. This is your only time to see the house. On the day of the foreclosure/auction, you will have to bid on the property. You must be prepared that day with 10% of the sale price. There are no contingencies, no appraisals, and no inspections. You bid on the house “as is”.

In many foreclosures, the houses are in poor repair. If the homeowner could not make the mortgage payments, it is likely they were also neglecting upkeep. So, you must be prepared to take on repair expenses, and figure them into the end price for the home. These repairs could be a significant factor. Major repairs like roof or septic can cost up to $30,000 and beyond.

To find foreclosed properties, you can use Internet search engines and check with your local newspapers, where the auctions are listed in the real estate section.

In a bank-owned property, the bank owns the real estate, has already determined a price, and offers the home (usually) at a fair market value (or just below). There is no auction; the home is offered through the local MLS system. Since it costs the bank a considerable amount of money to manage the property and provide regular maintenance, the bank is usually a very motivated seller. Bank-owned homes are sold with the “usual and customary terms”.