Buying foreclosures and REO properties offers us one of the greatest wealth building opportunities of our generation. This article is intended to help you learn how to find these properties should you consider investing in and buying foreclosures on your own.

However, from personal experience, I must say up front that buying foreclosures on your own can be fraught with risk and stress. In this author's opinion, there is a better way of investing in and buying foreclosures that can significantly reduce the risk and stress. And that is by investing with REO companies.

REO companies do all of the work for you. This includes buying foreclosures (and REO properties), rehabbing these homes to "move in" condition and then re-selling them. They do this in bulk, acquiring up to hundreds of homes at a time. And the premier REO companies can process these homes in as little as 4-6 months. Then, their investors share in the profits! It is true "passive income".

To learn more about REO companies, click here:

Whether you choose buying foreclosures on your own or letting an REO company do it for you, it is still important to understand the fundamentals and what is involved.


Although they are actually very different, the real estate industry tends to loosely blur the definitions of "foreclosure properties" and "REO properties" and use them interchangeably. (I am guilty of this as well.) Here is simple definition for each:

~ FORECLOSURE PROPERTIES: Homes that are in a particular stage of the legal foreclosure process.

~ REO PROPERTIES: Homes that have completed the foreclosure process, did not sell at the Trustee's Auction (or Sheriff's Sale) and therefore the property's title reverted legally to the lender or bank.


Before you consider buying foreclosures or REOs, it is very important to understand the legal foreclosure process and the terminologies involved. For an easy-to-understand summary of the foreclosure process, click here:

Next, when buying foreclosures and REO properties, before you start searching for properties to invest in, you need to get your financing in order. In other words, you need to figure out:

a. How you are going to finance the investment.

b. How much house you can afford.

Also, you need to have the money readily available for a fast transaction when you find foreclosure properties that you want to invest in.

Then, you need to determine the property characteristics that you would consider:

* Location: state, city, zip code, neighborhood

* Property type: single family residence, condo, duplex, multi-family apartment building, etc.

* Number of bedrooms, baths, etc.

* Fixer upper vs. turn key: how much work & additional money do you want to put into a foreclosure property?

* Price range

* Profit margin: how much money do you want to make on your investment?


Having the property characteristics predetermined will make your search much more efficient. And, having your financing already in place, you are well on your way to begin searching for and buying foreclosures.

If you read my webpage on the foreclosure process as suggested above, you may have recognized that there are several opportunities for buying foreclosures during or immediately following the foreclosure process:

1. During the "Reinstatement Waiting Period".

2. At the "Trustee's Sale" (aka "Sheriff's Sale") - which is an auction.

3. From the banks as a "REO Properties" (repossessed homes).

It is relatively easy to find information about properties going through the stages of the foreclosure process (see #1 & #2 above). During the foreclosure process, various "legal notices" are filed into the public records with the County Recorder's Office and also published in local newspapers.

The most efficient way to find properties in the various stages of foreclosure is to visit the County Recorder's Office and search through the public records. This is usually free and the records are available to anyone. The downside is that it can be very time consuming. But, it is time well spent, considering that you are "sifting for diamonds".

Of the 3,000+ counties in the United States, only a few have their public records available via the internet. So, you will most likely have to visit the County Recorder's Offices in person to conduct your search. Some have their records computerized, but most do not, which can make searching for and buying foreclosures very tedious. Plan on spending a lot of long days in these offices.

Basically, the only information that you will obtain from the public record of notices about foreclosure properties is an address for the property. So, this is really just a beginning step towards buying foreclosures.


In addition to homes involved in the legal foreclosure process, there are two other situations related to buying foreclosures where you can find excellent investment opportunities that can also help out homeowners on the brink of foreclosure, which I call "distressed properties":

4. Properties soon to enter the legal foreclosure process due to payment defaults.

5. Properties with mortgage balances greater than the market value of the home. (Sometimes called "upside down" properties.)

So, there are really FIVE investment opportunities related to buying foreclosures. The challenge is finding a property in one of these situations that matches the property characteristics that you have predetermined.

There are several ways to find "DISTRESSED PROPERTIES" (see #4 & #5 above):

* Local newspapers & other publications: look in the classified and real estate sections for advertisements with terms like "must sell", "motivated seller", etc.

* Drive-bys: drive through neighborhoods and look for "FSBO" signs (For Sale By Owner) and start knocking on doors.

* Real estate agents/brokers: leverage their local knowledge of distressed properties and FSBO's plus their access to the Multiple Listing Service (MLS) which itemizes all local properties listed for sale (except FSBO's).


As mentioned earlier, REO properties are homes that have completed the foreclosure process, did not sell at the Trustee's sale auction and ultimately reverted to become the property of the banks (see #3 above). "REO" is an acronym for "Real Estate Owned" (by the bank).

Using the Internet to Find REO Properties:

A number of banks and other lenders provide access to their REO properties on their websites that you can review in your search for buying foreclosures properties. Some are very user friendly and allow you to search using various property characteristics.

Asset Management Companies:

These entities work for the banks by marketing their REO properties. Their role is to find people interested in buying foreclosures and help the banks liquidate their inventory of REO properties. (Banks do not want to own REO properties. Holding onto these homes ties up their capital and reduces the amount of money that they can lend, which is their livelihood.)

Asset management companies, like some banks, will typically have websites posting bank REO properties that you can review in your search process when buying foreclosure properties.

Property Listing Services:

There are many companies on the internet offering lists of both foreclosures and REO properties for sale. You can even find their lists sometimes on eBay! However, there are a lot of scams out there, so you never really know how accurate the information you are buying really is. Buyer beware!

Real Estate Investment Clubs:

Most communities have organizations or clubs formed by investors and real estate professionals. These can be great resources for developing relationships and providing good leads for buying foreclosures and REO properties.

Real Estate Professionals:

Real estate agents and brokers can be invaluable resources for buying foreclosures and REO properties because of their local knowledge, access to homes via "lock-box" entry privileges and Multiple Listing Service access.

REO Companies: (Author's choice)

This is how I invest in foreclosures and REO properties. These entities specialize in buying foreclosures and REO properties - it's all they do. They purchase these homes in bulk from the banks and other lenders, do any necessary rehab work and resell them very quickly at a profit for their investors. They do all of the work! Therefore, it generates PASSIVE INCOME.

To learn more about REO companies, click here:

U.S. Government-Owned Homes:

Another resource for finding REO properties is government-owned homes. You can bid on properties owned by various government agencies including: HUD, VA, U.S. Marshal Service, Dept. of the Treasury, IRS, Fannie Mae, Freddie Mac and others.


As you now know, there are numerous resources that you can use to find foreclosure properties and REO properties for investment. In fact, it can be overwhelming. The key to buying foreclosures is sticking to the property characteristics that you predetermined at the start of this process. (Especially price range and desired profit margin.)

If you would like to learn more about buying foreclosures:


Author's Bio: 

John Hanlin is an Independent Investment Consultant specializing in low risk, high yield investments secured by real estate. He is a seasoned investor of over 25 years, manages the investors' website: and is the author of "The LazyMan's Guide to Understanding Foreclosures & REO Property Investment" available at