Buying a foreclosed property
"Usually... I think that's overstating the case.  You CAN get a bargain (especially if the place is in not-so-great condition), but not every foreclosure will be a good deal even if it is priced well below its most recently appraised value. As the buyer it's your responsibility to determine whether it's priced well or not, and to decide whether you're willing and able to repair its deficiencies after you buy it. The same's true when purchasing any house; foreclosures just make it more likely that there are problems and (hopefully) wind up being priced to allow for them. I don't know of a single website which lists all foreclosures. Some of the home listing websites do have a ""show me foreclosure listings"" filter, and I'm sure that the better tools available to real estate agents can select these. But if that's the direction you're interested in going, you should be looking at distressed properties generally, NOT just foreclosures; you may get a better deal, in the long run, by going for the one that has been mechanically maintained but is just plain ugly rather than the one with a pretty skin whose heating system hasn't been serviced for the last decade. Do your homework, shop around, don't fall in love with any one house... all the same rules apply at this end of the spectrum just as strongly as they do in the mid or upper ranges. Perhaps more so. Happy hunting!" No, it is not true. It depends on the market, the banks' inventory, the original debt that was owed, etc etc. The banks generally want to recover their money, so in case of underwater properties they may end up hold a property for years until prices bounce back (as it happened during the last crisis when many houses were boarded for months/years until banks put them back on the market hoping to sell at a price that would allow them to recover their losses). That may depend largely in which country you are in, the legislation in that country and the state of the economy and property market (more specifically) at the time of the foreclosure. In Australia, where we do not have non-recourse loans (except in SMSFs) the banks are obliged to recoup as much as possible for the mortgagee, however they would not hold on to the property indefinitely, as that could cause other problems and they have to return the mortgagee portion of the funds back to them (if there is any funds left after the bank takes their portion).  In 2008, when the property market here was weak we had bought some foreclosure houses and were able to get them 20% to 25% below what they were selling at the year before. If there was a forclosure in today's strong market in Australia (and especially in Sydney), I dought you would get much of a discount at all. So it may largly depend on the demand and supply at the time of the forclosure. "Like most other things, this is ""sometimes,"" but not always true. Sometimes banks will be willing to sell at a discount, sometimes they will hold out for ""full price."" But if you want a discount, this is a good place to ""look."""
well yes but you should also begin to understand the sectoral component of real estate as a market too in that there can be commercial property;  industrial property and retail property; each of which is capable of having slightly (tho usually similar of course) different returns, yields, and risks.  Whereas you are saving to buy and enter into the residential property market which is different again and valuation principles are often out of kilter here because Buying a home although exposing your asset base to real estate risk isnt usually considered an investment as it is often made on emotional grounds not strict investment criteria. "National City Bank did great on subprime.  They bought First Franklin for around $100m, took millions out in profit for about a decade, and sold first franklin for $1b to Merrill Lynch.  What killed NCB was home equity lines or credit, 2nd liens, which were given to high scoring conforming borrowers.  But when the panic set in the media told people ""dont pay your mortgages, the government will bail you out"" and people stopped paying on their 2nds.  Values dropped and in order to foreclose on a 2nd you have to buy out the 1st lien too... not possible.  That killed the NCB balance sheet and the sharks in DC all but forced NCB to capitulate to PNC and be acquired for cheap." "Some of it is very simple but almost all of it is very non-intuitive. Imagine that Donald Trump owns a lot of property that is valued at $1bn. So he puts that up as collateral to buy some gold worth $2bn dollars. A little while later the banks discover that the properties are only worth $100mm.   In this case $900mm has suddenly disappeared and moreover the banks are in deep shit because the Donald owes them $2bn and has posted collateral worth $100mm.   When they try to rough up Donald he tells them that instead if they go along with his ponzi scheme they might be able to sell his new $2bn property to someone else for $4bn, this way the banks will get their money bank and Donald will make a nice little profit. So the banks lend him some more money.   This scheme only works until people start refusing to buy these properties at Donald's prices. This is a nutshell what has happened. Property prices were much higher than they should have been and Banks had derivatives which weren't worth as much as they claimed. When the market/people wised up to this fact the prices came crashing down and money ""disappeared""." "A mortgage is simply a loan backed by a property (and, because it's both very large and very common, covered by some specific laws).  As such, the bank isn't an ""investor"" in your house; it simply is lending you money with the property as collateral.  So, it doesn't get any share of the profit. As long as you sell the house on your own, for more than you owe, most of the time in the US you will get about 92-94% of the sale price back, minus whatever you owe on the house.  The 6-8% you don't get will go to the realtors as commission (unless you sell by owner and don't sell to someone with a buyer's agent), and to pay some of the costs of the sale (how much of those you pay depends on the deal you make with the buyer, but it's common to pay some of them in some areas).  You also will owe taxes (potentially).  You then pay the bank back from that amount. As such, in your example, let's say Bob owes $50k on his house, and sells it with a realtor for $150k.  He gets $150k-0.06*150k = 141k after commission. He then hands the bank a check for the current payoff of the loan: that amount is usually slightly higher than the remaining principal, because you owe the interest that's accrued between [last payment you made] and [day of sale].  Let's say this is a 6% loan, which works out to around 0.5% per month, and it's been half a month since his last payment, so he owes another 0.25%, or another $125.  Some mortgages also may have prepayment penalties (check your note).  In this case there isn't a penalty, so the bank gets $50,125 from the sale.  Usually, the bank would get that immediately at closing - ie, he doesn't get the full $141k or $150k and then write a check, instead the title/closing company gets that amount, and gives the $9k to the realtors, the $50,125 to the bank, and the remaining $90,875 to him.   Don't forget he may also owe income taxes, and sometimes other local taxes, on the profit on the sale. In this case the IRS wouldn't get anything (as it's under $250k), assuming it's a primary residence, but keep that in mind. Also - in the case of a foreclosure, the bank will get some extra money to pay for the costs it incurred in foreclosing on and selling the house." When I read that part of his post, it reminded me more of credit companies rather than banks. People default on credit all the time. I have no idea what the regulations are on the amount of credit that a company can issue, though.  And this is sort of part of what actually happened in the beginning of the economic crunch. A bunch of people began to trade for credit (debt) against what they thought the *future* value of their house or other real estate would be. After a while, people stopped being able to afford property at its future value, so they stopped buying it. When people then tried to sell their property for the future value that they had borrowed against, they couldn't, so they couldn't pay back their debt.  Because real estate had become a popular investment vehicle for the middle class, this was able to reach a kind of critical mass, and shortly afterward the effects rippled back into the credit market, which also had its own crunch -- a bunch of credit just disappeared overnight because so many people had assumed a level of debt that they could not actually fulfill their promises on once the future value of their home became completely imaginary. "Let me summarize your question for you: ""I do not have the down payment that the lender requires for a mortgage. How can I still acquire the mortgage?"" Short answer: Find another lender or find more cash. Don't overly complicate the scenario. The correct answer is that the lender is free to do what they want. They deem it too risky to lend you $1.1M against this $1.8M property, unless they have $700k up front. You want their money, so you must accept their terms. If other lenders have the same outlook, consider that you cannot afford this house. Find a cheaper house." "Verbal agreements are not legally binding. Unless you have signed a new lease agreement, you are not obligated to continue renting the property - you are free to go.  On the other hand, if you really like the place and want to stay, you should sign another lease agreement. This agreement will be binding on whomever owns the home - whether it is your current landlord, a bank or a new purchaser.  But, if you go this route, make sure that there is not a clause that says the lease agreement is void upon foreclosure (or something similar). This is a standard clause in lease agreements allowing the bank to cancel the lease. Another option, if you really like the house is to offer to buy the property. If the property is being foreclosed on, you could suggest buying on a short sale. Here is a link to an article I wrote entitled ""Buy Instead of Rent: A Recovering Real Estate Market"" that discusses the benefits of buying rather than renting." I've done this in AZ. It's important to know which lender is foreclosing, because if it's not the most senior one, then your purchase can later be foreclosed. A foreclosure extinguishes all junior interests, but can itself be extinguished by a more senior interest. I may not have the correct terms here but you get the idea. You should also check to be sure property taxes are current. They are probably being paid by the original lender, but it wouldn't hurt to check. Make sure you understand the requirements for participation in the auction. In my case they required that I bring a $10K cashier's check made out to myself. On winning the auction I endorsed the check over to the auction company and had 24hours to come up with the remaining funds in cash. The property I bought had been previously sold at a Sheriff's sale to satisfy a judgment in favor of the Homeowner's Association for delinquent dues. The HOA bought the property at the auction and received a Sheriff's deed. At this point the original owner's possessory interest in the property was extinguished. Nevertheless, the original mortgage and deed of trust were still in place, being senior to the HOA's interest. About a year later the lender foreclosed on the property and I bought it at auction at the courthouse. This had the effect of extinguishing the HOA's interest, a fact that took some explaining to the water utility to get the account in my name :-)