Foreclosure guide · Updated October 2026
You can buy a foreclosed home at different stages and from different sellers, and each has its own rules. This guide covers how the process works, what it costs, and where the official listings are.
Independent listings and information resource. Not a government agency, lender or broker.
01
Foreclosure is the legal process a lender uses to take back a home when the borrower stops making mortgage payments. For a buyer, “foreclosure” can mean three quite different things, depending on where the home is in that process: before the sale, at the auction, or after a lender or agency owns it.
The process depends on the state. Some states run foreclosures through the courts, where the borrower can raise defenses; that’s judicial foreclosure. Others let a trustee carry out the sale under a “power of sale” clause in the mortgage or deed of trust, after a series of required notices; that’s non-judicial foreclosure. Either way, the home is generally sold at a public auction to the highest bidder, and the lender often bids too.
“Foreclosure processes differ by state.”
The owner still owns the home and can still sell it.
The home goes to the highest bidder, and the lender often bids too.
Listed for sale like other homes, usually through an agent.
02
What happens at each stage, and whether there is anything for a buyer to buy yet.
Stage 1
A homeowner falls behind on the mortgage. Under federal mortgage servicing rules, a servicer generally can’t make the first notice or filing for foreclosure until the borrower is more than 120 days behind. There’s nothing for a buyer to buy yet.
Stage 2
Foreclosure has started or is close, but the owner still owns the home and can still sell it, through a regular sale or a short sale in which the lender agrees to accept less than what’s owed. Buying here means working with the owner and, in a short sale, waiting for the lender’s approval.
Stage 3
If the loan isn’t brought current and the home isn’t sold, it goes to a public sale run by a court officer or a trustee. The highest bidder wins, usually paying in cash or certified funds on strict deadlines, often without seeing inside.
Stage 4
If no one outbids the lender, the lender takes ownership and the home becomes “real estate owned.” The owner usually works through title and occupancy issues, then lists the home for sale through a real estate agent. Homes tied to FHA, VA, USDA, Fannie Mae or Freddie Mac loans are often sold by those organizations instead of a bank.
03
Bank-owned homes are listed through local real estate agents, usually on the MLS, like any other home for sale. They’re typically sold as-is. Expect the seller to ask for a lender’s pre-approval letter or proof of funds with your offer, and to use its own addenda to the purchase contract.
HUD homes are homes the U.S. Department of Housing and Urban Development owns after foreclosures on FHA-insured mortgages. They’re listed on HUD Home Store, and buying one follows HUD’s own steps:
Eligible for an FHA-insured loan in its current condition.
Needs repairs estimated at no more than $10,000; eligible for an FHA-insured loan if the lender sets up a repair escrow at closing.
Repairs are estimated above $10,000, so it isn’t eligible for an FHA-insured loan unless you use an FHA 203(k) renovation loan.
Who counts as an owner-occupant: someone who will live in the home and hasn’t bought a HUD home as an owner-occupant in the past two years.
Good Neighbor Next Door: HUD offers law enforcement officers, pre-K through 12th-grade teachers, firefighters and emergency medical technicians 50% off the list price of eligible homes in HUD-designated revitalization areas, in exchange for living in the home for 36 months. These homes are listed in a separate tab on HUD Home Store.
Financing codes and bidding rules: HUD Home Store FAQ (opens in a new tab)
VA-acquired homes. The Department of Veterans Affairs acquires homes when VA-backed and VA-financed loans end. VA markets them through its property management contractor, Vendor Resource Management (VRM): local agents list them on the MLS, and they can also be viewed on VRM Properties. VA says to contact a local real estate broker of your choice to see one. You don’t have to be a Veteran to buy, and some properties are eligible for VA Vendee seller financing for qualified buyers.
USDA homes. USDA Rural Development and the Farm Service Agency list previously owned homes, farms and ranches on the USDA-RD/FSA Properties site. Homes are sold by public auction or another method, depending on the property. Anyone can buy, but an offer or bid has to go through a real estate agent, broker or servicing representative, and USDA suggests contacting the local servicing office for the latest status and any program benefits you might qualify for.
Fannie Mae sells its foreclosed homes through HomePath; Freddie Mac sells through HomeSteps, its real estate sales unit. Both are listed with local agents, and both use a First Look period: for the first 30 days a home is listed, only owner-occupants, public entities and qualifying nonprofits can make offers. Investors can offer after that.
First Look period: HomeSteps First Look (opens in a new tab)
Some federal agencies sell real estate they’ve seized or no longer need:
Most foreclosure auctions are run locally, by a sheriff, court officer or trustee, and announced through public notices. They move fast and leave the risk with the buyer:
Before you bid, get a title search from a title company or real estate attorney, and read the auction’s terms in full.
04
These describe types of property, not homes for sale. Real listings come in your alerts and on the official sources below.
A home the lender took back after a foreclosure sale, now listed for sale by the lender.
Typically
Watch for: deferred maintenance and systems that were shut off while the home sat empty. Budget for an inspection.
How foreclosures work
Homes the U.S. Department of Housing and Urban Development owns after foreclosures on FHA-insured mortgages, sold through HUD Home Store.
Typically
Watch for: the bid deadline and financing code on each listing. Uninsured (UI) homes need cash or a renovation loan.
HUD homes, step by step
Homes the Department of Veterans Affairs acquired after VA-backed or VA-financed loans ended, marketed by VA’s property management contractor.
Typically
Watch for: the listing’s financing options. Not every property is Vendee-eligible.
Government-owned homes
Previously owned homes for sale by USDA Rural Development and the Farm Service Agency, mostly in rural areas and small towns.
Typically
Watch for: special instructions in each listing’s comments, and ask the local USDA office about program financing.
Government-owned homes
Foreclosed homes owned by Fannie Mae, listed on its HomePath site.
Typically
Watch for: as-is condition and the occupancy certification owner-occupant buyers sign.
Fannie Mae and Freddie Mac homes
Foreclosed homes owned by Freddie Mac, marketed and sold by HomeSteps, Freddie Mac’s real estate sales unit.
Typically
Watch for: the “Agreement of Purchaser” affidavit owner-occupant buyers and their agents sign.
Fannie Mae and Freddie Mac homes
The owner has fallen behind and may be facing foreclosure, but still owns the home and can still sell it.
Typically
Watch for: anyone asking the owner to sign over the deed. The FTC warns this is a common foreclosure-rescue scam.
Foreclosure stages
The public sale at the end of the foreclosure process, run by a court officer or a trustee depending on the state.
Typically
Watch for: liens, occupants and redemption rights, which vary by state. Get a title search before you bid.
Buying at auction05
Most foreclosed homes are sold in their current condition, and the seller usually won’t make repairs. Plan for an independent home inspection, and ask whether the utilities can be turned on so the inspector can test systems.
Homes that sat empty can have problems you won’t see in photos: roofs, plumbing, heating, mold or missing fixtures. Get repair estimates before you commit to a price.
Lenders look at the home’s condition as well as yours. HUD homes coded UI aren’t eligible for a standard FHA-insured loan, and homes that need major work may call for cash or a renovation loan.
At county and trustee sales you may be buying without an inspection, with liens or occupants to deal with afterwards. Rules vary by state.
Exclusive bid periods, First Look windows, required addenda and certified-funds deposits all run on fixed timelines. Missing one can cost you the home.
Budget for the inspection, appraisal, title search, owner’s title insurance and lender fees. Ask the closing agent whether any unpaid property taxes, utility bills or homeowners association dues are attached to the property.
06
Get a lender’s pre-approval letter, or proof of funds if you’re paying cash. HomeSteps asks for one with every offer.
If you’ll live in the home, HUD’s exclusive period and the HomePath and HomeSteps First Look window let you offer before investors.
Bid deadlines, financing codes and special instructions differ from home to home. USDA puts them in each listing’s comments.
As-is means the seller won’t fix things, not that you shouldn’t know about them.
Ask for a title search and consider owner’s title insurance, which protects you if someone later claims a debt or ownership interest from before you bought.
A HUD-approved housing counselor can walk you through buying a foreclosed home, often at little or no cost.
07
Tell us where and what you’re looking for. We’ll send foreclosure listings that fit as they come up, by email and by text if you choose.
08
Government agencies, Fannie Mae and Freddie Mac publish their own for-sale homes. These are the official sites. Bookmark them, and always confirm listing details there or with the listing agent.
Official site
hudhomestore.gov
Run by the U.S. Department of Housing and Urban Development (HUD)
HUD-owned single-family homes for sale, plus the Good Neighbor Next Door, HUD-approved nonprofit and Dollar Homes programs. Individual buyers bid through HUD-registered brokers.
Listing service
vrmproperties.com
Run by Vendor Resource Management (VRM), the property management contractor for the U.S. Department of Veterans Affairs
Homes VA acquired after VA-backed and VA-financed loans ended. VA says these are listed by local agents on the MLS and can also be viewed on VRM’s site.
Official site
properties.sc.egov.usda.gov
Run by the U.S. Department of Agriculture, Rural Development and Farm Service Agency
Single-family and multi-family homes, farms and ranches for sale by the federal government, by public auction or another method depending on the property.
Official site
homepath.fanniemae.com
Run by Fannie Mae
Foreclosed homes owned by Fannie Mae, with First Look status shown on each property.
Official site
homesteps.com
Run by Freddie Mac (HomeSteps is its real estate sales unit)
Foreclosed homes owned by Freddie Mac, nationwide, with a First Look period for owner-occupants.
Official site
treasury.gov
Run by the U.S. Department of the Treasury (sales handled by its contractor, CWS Asset Management and Sales)
Seized and forfeited real property nationwide and in Puerto Rico, including single and multi-family homes. Auctions are open to the public and you don’t need a broker to bid.
Listing service
reallook.com
Run by the U.S. Marshals Service’s Real Property National Contractor
Real property forfeited to the U.S. government. The Marshals Service says most are listed with licensed brokers at fair market value and advertised on Real Look and major real estate websites.
Official site
realestatesales.gov
Run by the U.S. General Services Administration (GSA)
Surplus federal real property sold to the public through competitive sales and online auctions.
US Home Assistance is not affiliated with any of these agencies or companies. Names are used only to identify the official sources. Rules and programs can change, so check each site for current terms.
09
Often, yes. HUD homes coded IN are eligible for FHA-insured financing as they are, and IE homes are eligible with a repair escrow. UI homes need cash or an FHA 203(k) renovation loan. For other foreclosures, it depends on the home’s condition and your lender.
For HUD homes, yes: individual buyers must bid through a HUD-registered broker. USDA sales need an agent, broker or servicing representative. HomeSteps lets buyers without an agent contact the listing agent directly. Treasury auctions don’t require a broker.
Not always. Prices reflect location, condition and demand, and repairs can quickly close any gap. Compare recent sales nearby and get an inspection before deciding what to offer.
Not necessarily. Ask the listing agent or auction company about occupancy before you bid. After an auction, removing anyone still living there can become the buyer’s responsibility under state law.
Bank-owned, government-owned and auction listings that fit your area and budget, sent by email, and by text if you choose.
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