Where to Find Bank and HUD Foreclosures

Despite what you or I may think about the current state of the U.S property market and the mis-handling of the situation by the financial institutions, the simple fact is that there are hundreds of thousands of foreclosed properties for sale. The other fact is that most of these properties are owned, either directly or indirectly by the government and the banks. This presents an enormous opportunity to purchase property at a low price. I will not make the mistake of trying to tell you this property is “50% below market value,” because the market has dropped considerably and many of these properties are not in prime condition. That doesn't mean there are no bargains to be found, just that you shouldn’t believe much of the hype produced by the real estate companies, media and listing sites.

So, where do you go to find these properties?

This is a simple guide to where to find bank and HUD foreclosed properties. Neither the banks, nor the government wish to keep these properties on their portfolio indefinitely. The maintenance costs alone are eating into the value on a daily basis. So, they wish to sell them and they wish to sell them now. Being the government and banks, they do not go out of their way to make it easy to find them, but I have compiled a collection of links to the best sources.

The banks call these homes REO properties or Real Estate Owned. I am not sure why they are called this other than to try and convince you they are something other than homes that have been repossessed. That should not discourage you from buying one though. There are many foreclosure listing sites attempting to sell you access to a list of these properties, but here is the information – for free.

These properties are not an asset to the bank. The maintenance costs and depreciation is costing the bank money on a daily basis. Foreclosures are set to rise for the foreseeable future and the banks are keen to dispose of these properties as quickly as possible. The price will reflect both the condition of the property and the condition of the market. But as they are banks, they will continue to perpetuate the problem by offering low cost start-up mortgages on these properties, cleverly hiding the fact that the cost will increase after a period of time. This is how the subprime crisis started in the first place. These properties can be a bargain. Do not fall into the bank’s trap though. Make sure you can afford the mortgage costs and take into account the cost of restoring the property to full value condition. All of these properties will also be listed with a local real estate agent.

Despite the fact that Freddie Mac and Fanny Mae (aren’t those lovely, friendly names for government sponsored money lenders?) are ostensibly not part of the government, I have included them here because they actually are.

It is not only the mortgage arms of the government that seize and sell property. Here is a list of links to other government agencies that hold large numbers of homes.The Internal Revenue Service (IRS), the Marshals and a few other agencies have some interesting property to sell.

The United States Department of Agriculture is not only responsible for developing and executing government policy on farming, agriculture, and food, promoting trade in the U.S and overseas, and looking after the needs of America’s agricultural workforce. It also holds large numbers of foreclosure properties, mostly farms and businesses but also family homes and other seized agricultural property.

The U.S. Marshals Service enforces the Department of Justice's Asset Forfeiture Program and disposes of properties seized and forfeited by federal law enforcement agencies and U.S. attorneys nationwide. According to the website, the program has become a key part of the federal government's efforts to combat major criminal activities, by generating revenue. They sell property seized by the F.B.I, The DEA, the Department of Homeland Security, the ATF and the U.S. Attorney’s office.

The IRS seizes and sells property to cover unpaid internal revenue taxes. They have large numbers of homes along with commercial real estate and other items. Mixed in with the real estate is art, antiques, boats and all manner of other items. Much of the real estate is offered for quick sale in an auction. It is important to check the title offered and other encumbrances before making a bid. The website is very detailed with good descriptions and listing by state.

The government has also set up a new portal where there is a list of homes for sale by state. These properties have been seized, either by the U.S Department of Housing and Urban Development (HUD), Agriculture (USDA) and Veteran’s Affairs (VA).

There is also a listing for property for sale by state and local government.

On the website, there are also listings for commercial properties, and land, and International Real Estate. Most of the international listings are for residences in South America, Indonesia and Africa. Interested parties can contact the government through this website.

Perhaps the most interesting governmental property sales portal is the U.S. General Services office of property disposal. They deal with the more esoteric property available such as lighthouses. These are not strictly foreclosure property, but interesting nonetheless. One of the recent interesting properties offered for sale is the Seattle INS Federal Building. 1.1 Acres in size, four stories high and an attic mechanical penthouse building of 77,000 square feet and listed on the Historical Register.

Some of these buildings, such as the lighthouses are available to be converted into private residences. If you feel the need for a little isolation, may I respectfully suggest the Point No Point Lighthouse in Chesapeake Bay, although bidding was suspended at $135,000 after the Navy intervened claiming that the lighthouse serves as a boundary marker for one of their restricted area danger zones. Caveat Emptor.

Realtytrak, a foreclosure listing specialist claim to have over a million homes on their site. Foreclosures will continue to increase. This means two things: One, there is a glut of low price property and two, this will continue to drive average prices down. There are a few exceptions to this – Manhattan luxury condominiums will likely not be hitting the auction block at a 50% price reduction any time soon, and there are certain areas of the country largely unaffected by the problem.

Some states in particular have vast numbers of property – Florida and Nevada are two examples.

Buying a foreclosure property is a good way of either entering the property market or building a property investment portfolio, but there are some things to bear in mind:

• Much of this property is in a poor state of repair. The longer it remains unsold, the worse the condition becomes. The banks will not spend vast sums maintaining these properties and it is good advice to hire a contractor to inspect the building before purchase.
• The market is falling. It is unlikely you will be able to flip any of these properties quickly. They should be looked at either as a longer term investment, or as a primary residence or rental unit. This is not always the case, and if you are planning on flipping the property, I suggest reading either Donald Trump’s book or buying his audio CD. If anyone knows how to screw every penny from a real estate deal, it is him.
• Take legal advice to ensure the property is free and clear of any outstanding liens. Generally this is no longer an issue, but better safe than sorry.

It is important to educate yourself as to the processes, legal requirements, tax costs and other aspects of buying a foreclosure home. Here are some helpful sites and links to more resources.

Don't listen to this guy in the video on the right. He talks about buying property, "thirty or forty grand under market." If that's what it sells for - that is the new market price.