The REIs Guide to Foreclosures: 6 Steps to Finding Auction Properties

There has been an increase in foreclosure activity in many markets across the U.S, which may create opportunities for real estate investors (REIs) seeking potential investment properties. Foreclosure filings increased 17% year-over-year in Q3 2025, and bank repossessions increased to 33%. That's 101,513 properties entering some stage of foreclosure in just 3 months.

What does this mean for you as a real estate investor? Rising foreclosure rates in markets like Florida, Nevada, and South Carolina could present a prime opportunity for real estate investors. For those looking to fix-and-flip or use a BRRRR strategy to grow their rental portfolio, this could mean more chances to find undervalued properties ripe for renovation and resale or long-term rentals.

We’ve created a comprehensive playbook for finding and purchasing foreclosed properties at auction. You'll learn how to find foreclosed properties in high-activity markets, and understand the nuances of all-cash requirements and legal processes—skills that could give you a competitive advantage when buying foreclosures.

The techniques shared here are based on strategies used by seasoned REIs to handle competitive foreclosure auctions and secure desirable investment properties. If you’re looking for a roadmap for these unique investment opportunities, this could be it.

What are foreclosed properties and why are they on the rise?

For a homeowner, a foreclosure is when the lender seizes the home because of a loan payment default. This means the homeowner has missed payments for up to 120 days or more without resolving the debt. The lender then sells the property to try to recover what they're owed.

A foreclosure typically happens in three stages, which may present different entry points for real estate investors to acquire these properties. The strategy an investor uses might depend on which stage the property is in:

Pre-foreclosure (before the auction): The homeowner is in default, but still owns the property. You could offer to buy the property through a short sale, which requires lender approval. This could create a win-win both for you and the seller, but it may require lengthy negotiations between you, the seller, and the bank.
Foreclosure auction: The property is available for investors and other buyers to bid on at a public auction. It often sells "as-is" to the highest bidder. You might need to provide cash or a cashier's check within 24 hours to 30 days of winning the bid. You would also assume responsibility for any liens or occupants, and you won't be able to inspect the property's interior before bidding.
REO (Real Estate Owned): If the property doesn't sell at auction, it becomes a bank-owned property or a REO. You can purchase these through traditional channels, and use traditional financing, but they are still sold as-is.

While there are clear risks and complexities REIs might have to deal with at each stage of foreclosure, the financial rewards could be substantial. Foreclosed properties often come with significant discounts, sometimes up to 20-40% below market value.

Tiffany Da Silva, a successful real estate investor from Central Florida who buys properties at auction, adds:

“I learned about foreclosure auctions after coming across a Tiktok video showcasing how to buy tax deed sales. After researching the 30 second bit of information I got from there, I was already submitting my deposit for an auction that was happening a week later.

From there I ended up winning a property for 1/2 the market value and since then I've been obsessed with auctions. Now I’ve purchased 5+ auction properties with amazing discounts & was able to get a 60%+ ROI on most of these deals.”

Current market context

Many distressed properties on the market today may be tied to loans from 2021 and 2022. Homeowners during this period often bought at peak prices with minimal equity. Now, some of these owners are facing declining property values and higher carrying costs, like rising property taxes and insurance premiums.

For homeowners with little equity who are struggling with their monthly loan payments, foreclosure might seem like the only option.

Recent data from ATTOM indicates that foreclosure filings have risen 17% in some markets compared to last year. Florida currently has one of the highest foreclosure rates (1 in every 2,182 units), with Delaware, Nevada, Indiana, and South Carolina also showing increased foreclosures. For some REIs, these markets could present a unique opportunity to purchase these properties at discounted rates through auction and off-market channels.

What’s the catch with foreclosed homes?

Buying foreclosed properties might not be the best option for those with a low risk tolerance. Here’s what you could encounter when bidding at a foreclosure auction:

No inspection. You are essentially buying the property as-is, without being able to conduct a thorough inspection. You can't enter the property, check the roof, or see the backyard before bidding. Your assessment is often limited to what you can see from the street or learn from neighbors. This means you might become responsible for any issues you discover after the purchase, such as a cracked foundation or a damaged roof.
All-cash, immediately. Most auctions require full payment in cash or with a cashier's check within a short timeframe, ranging from 24 hours to 30 days, depending on state laws. Traditional financing may not be an option.
You inherit the mess. In addition to the physical state of the property, you could also inherit legal and personal complications from the previous owner. Any existing liens, title problems, or occupants become your responsibility upon winning the bid. You might even be responsible for taxes, insurance, and utilities on an occupied property and may need to handle an eviction process.
Intense competition. In a foreclosure auction, you may find yourself bidding against experienced real estate investors with significant financial resources. These professionals often purchase properties as their primary business, so it's a competitive environment.

Step 1: Finding foreclosure auction properties

Before you begin bidding on properties, many real estate investors suggest attending a few foreclosure auctions as an observer. This experience could help you understand how other REIs bid, how bid increments function, and the typical level of competition.

Where to look for foreclosure listings

Online resources:

Start your search on platforms like Auction.com, Hubzu, and Realtytrac, which aggregate foreclosure listings across the country. These sites might help expand your search and allow you to filter foreclosed properties by type, location, or auction date.
Check your county sheriff's or clerk of court's website. These are official local government sources for foreclosure information. They often post auction details weeks in advance, which could give you an advantage in timing.
For REO properties (bank-owned homes that didn’t sell at auction), you may want to monitor lender websites directly. Traditional bank lenders, such as Bank of America and Chase often have specific pages dedicated to REO listings.

Offline methods:

Check your county's major newspaper publication for foreclosure notices. Many states require foreclosure auctions to be published in local newspapers.
Try to learn about new opportunities before they hit the mainstream platforms by networking with foreclosure attorneys, real estate agents who specialize in distressed properties, and other real estate investors at your local REIA.

What are "Zombie properties"?

Zombie properties are abandoned and likely vacant homes that the bank has not yet repossessed.

Buying a zombie property might mean you get a property for cheap, but since you’re likely dealing with a property that has been neglected for a long time, the possibility of encountering serious, hidden problems could be much higher than with a typical foreclosure.

You probably won't find these properties on a website. You might physically have to drive for dollars, looking for signs of abandonment like boarded windows and overgrown lawns, then check public records to find more information about the property.

ATTOM reports that there was a slight YOY increase in the number of zombie properties across the US in Q3 2025. Of 222,318 properties in pre-foreclosure across the country as of the third quarter, 7,519 (3.38%) were zombie properties, up from 3.14% same time last year.

Step 2: Conduct due diligence (even when you can’t inspect)

One of the biggest hurdles with auction properties is that you can't perform an inspection. You could win a property at a great price only to discover major foundation problems or that you've instantly inherited tens of thousands of dollars in debt that you're now legally required to pay.

What you CAN do

Get a title search first. You could inspect the property's existing liens or encumbrances by getting a preliminary title report. Dig through municipal records for judgments, tax liens, easements, and unpaid federal or state income taxes.
Drive by the property multiple times. Visit during the day and night. This can give you clues about the condition of the property. Check for roof damage, broken windows, overgrown yards, and signs of occupancy. You also want to assess the neighborhood: Are there well-kept lawns and active streets? Or do you see a number of abandoned properties in the area?
Mine public records. You can pull property tax records, building permits, code violations, and utility billing history (long periods without utilities usage suggest vacancy and potential neglect) to get clues about a property's history and condition.
Talk to neighbors to get insights into the property's history.

Estimating repair costs

How do you budget for repairs you can't see?

You could bring a reliable contractor along for your drive-by inspections. Ideally, you want someone who can spot roof damage, structural issues, and red flags from just looking at a home's exterior.

While creating a perfect repair budget may be impossible without a full inspection, you could create a repair estimate with the insights of your contractor.

Once you have this estimate, experts suggest adding a 20-30% contingency. Kitchen remodels could range from $20,000 to $120,000. Bathroom overhauls sometimes run between $4,500 and $50,000. Roofing costs could vary between $3 to $20 per square foot depending on materials.

You'll likely need to handle the almost inevitable hidden problems that show up during foreclosure renovations. Tiffany advises real estate investors looking at foreclosures to always be prepared for these hidden repairs. She talked about the time she bought a property at auction, only to discover it needed major work.

“We bought a property blindly off an auction site in Sarasota (which was 2 hours from where we originally lived). After winning and paying for the property we then got to see it, and safe to say it was... just like the photos!

But of course, with investing, there are always undiscovered issues when buying and we later had to replace the HVAC unit, replace an entire bathroom (which worked for our benefit as we added in an extra one later), and had some major termite issues we would've never caught by the online images,” she said.

Although it could still turn out profitable, these costly repairs might not be visible until you start working on the property. Therefore, you may consider having a 20-30% contingency fund.

Step 3: Securing financing for a foreclosure auction

Foreclosures are often all-cash sales, with payment due in as little as 24 hours to 30 days, depending on your jurisdiction. This short financing timeline and the common lack of inspections mean that traditional bank loans may not be a viable option.

Financing options for purchasing properties at auction

Personal savings or cash reserves: If you have liquid capital, you could deliver the full amount via wire transfer or a cashier's check after you’ve won the auction.
Hard money loans: For real estate investors not using personal savings, a hard money loan, also called a bridge loan, is a common financing option that can help you compete with cash buyers. These loans can be funded in just a few days, giving you an edge in a competitive market.

Hard money loans are short-term, asset-backed loans from private lenders like Kiavi. They are typically secured and underwritten by the property being financed, rather than the borrower's creditworthiness. If you plan to use a hard money loan for a foreclosure auction, it's best to get pre-approved beforehand.

Private investors or partnerships: You could consider bringing in a partner or reaching out to friends and family for your auction financing needs.
HELOCs or cash-out refinancing: If you have at least 20% equity in your current home, you might be able to access it through a HELOC or cash-out refinance to help with auction purchases. A HELOC allows you to withdraw funds as needed, while a cash-out refinance provides a lump sum.

Step 4: Determine your maximum bid (and stick to it)

Everyone loves winning, and the excitement of bidding on auction day could lead to emotional decision making that could destroy your profit margins before you even own the property. Your best defense is math.

Calculate your Maximum Allowable Offer (MAO) before you attend the auction

Before you arrive at the auction, consider calculating a maximum bid. The formula most professional flippers use to determine their maximum bid or MAO is The 70% Rule. The calculation is:

(After-Repair Value x 70%) – Estimated Repairs = MAO

For example, if the ARV is $200,000 and repairs are $40,000, your max bid could be around $100,000 ($200,000 × 70% - $40,000). That 30% buffer ($60,000 in this case) might cover your profit (typically 10-15%), holding costs, financing fees, selling costs, and unexpected problems.

Once you determine your maximum bid, it’s a good idea to write it down and be prepared to stop if the price exceeds your limit. One of the most challenging parts of an auction can be maintaining the discipline to stick to your number.

Bidding increments often range from $500 to $5,000, depending on the property’s value, and it’s easy to overpay if caught up in the excitement of trying to win. As many real estate investors say, your potential profit is determined when you buy, so exceeding your maximum bid may result in a loss.

Winning an auction, but losing your profit margin isn’t a true win—sticking to your limit might be the smarter move.

Kiavi Tip: Use Kiavi’s ARV estimator to quickly calculate your ARV.

Step 5: Navigate the auction day process

On auction day, what separates professionals from novices is often preparation, observation, and discipline.

Pre-auction preparation

Register in advance, and arrive early with a valid state-issued ID and a cashier's check for the required deposit. You could grab the final sales list when you arrive, as property auctions are often postponed.

Kiavi Tip: Double-check the loan or parcel number you’re bidding on, not just the street address, to ensure you’re bidding on the right property.

During the auction

When bidding starts, you could let someone else go first. You want to start by observing. In many cases, bidders have to identify themselves when entering a bid. Watch how the experienced REIs in the room behave. This could be your final due diligence step.

If no one bids on a property you thought was valuable, they may know about title problems, structural issues, or liens you missed during your own research. You ought to be willing to walk away from a deal at the last second if something feels wrong.

Winning the bid

After winning a bid, you'll immediately pay a deposit of 10-20% and receive a receipt. The remaining balance is typically due within 24 hours to 30 days. Lenders may take around 15 days to approve the final sale.

However, there's a potential legal risk to consider. Some states have redemption periods, which allow the former owner to reclaim the property. To do this, they must pay the outstanding debt plus any late fees within a specific timeframe, ranging from 10 days to a year.

This redemption period differs significantly by state; for example, California has no redemption period. It is advisable to consult a local attorney to understand the specific laws in your area.

Learn the best practices for buying properties at auction. Sign up for the Xome + Kiavi on-demand webinar now.

Step 6: Close the deal and manage post-auction complexities

The post-auction process often starts with completing your payment within your jurisdiction's timeline (24 hours to 30 days). Late payments may trigger additional charges. After winning, lender approval might take around 15 days, and closing formalities could go on for several weeks after that.

Handle occupancy issues

If the property is occupied by previous owners or tenants, federal law may require you to give them a 90-day notice before beginning eviction proceedings. Additionally, if you inherit tenants, you could be legally obligated to honor their existing lease agreements.

Consider "cash for keys." Paying someone (a few hundred to several thousand dollars) to leave a property you own might seem counter-intuitive, but it could save you time, legal fees, and help forestall property damage.
Experts recommend not starting renovations until after the redemption period to avoid potential legal or financial complications if the property owner redeems the property.

Conclusion

Consider bringing in an attorney after you win the auction to help identify the complete scope of issues the previous owners may have left behind. You may want to uncover every single lien, as you'll be responsible for all outstanding ones, such as IRS liens (with 120-day redemption rights), unpaid property taxes, code enforcement issues, HOA dues, and utility bills. You could also contact lien holders to negotiate, and they might reduce or even eliminate the debt.

Buying auction properties could be a great opportunity, but it’s important to do your homework and protect yourself from unexpected costs. With the right preparation and resources, you could turn your auction win into a smart real estate investment.

Ready to start bidding on properties? See what kind of financing you qualify for. Visit this link to get started.

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