I need to save money on my house purchase and I hear buying a house foreclosure can do that. What do I need to know?
In 2025, foreclosures are less common than during the 2008'2012 housing crisis, but they still occur, particularly in regions hit by economic downturns or natural disasters.
Foreclosure sales occur when a lender repossesses a property due to the homeowner's failure to pay the mortgage and then sells it to recover the loan amount.
If you suspect a foreclosed home may cost less, you are correct. You actually can save money buying a foreclosed home. Foreclosures in 2025 can show a 5'7 percent discount off list price.
But there are challenges, too. For one thing a foreclosed home is often listed 'as is.' A 2024 HomeAdvisor report estimates average repair costs for foreclosed homes at $10,000, $30,000, often for issues like plumbing, electrical systems, or structural damage.
Be prepared for competition from investors. Historically, foreclosure sales attract investors who pay cash because these properties are often sold, as-is' and at auctions, where cash offers are preferred for quick closings. But, cash buyers are less dominant than in past years. Lenders selling foreclosures are increasingly open to financed offers, as the pool of cash buyers has shrunk. A 2024 Redfin report noted that 60 percent of foreclosure sales now involve financed buyers, up from 50 percent in 2020, reflecting banks' willingness to work with mortgage-backed offers to move inventory.
If you are financing, ensure pre-approval from a lender, as lenders prefer buyers who can close quickly. FHA 203(k) loans, which allow borrowing for repairs, are popular for foreclosures, with interest rates around 6.8% in 2025, according to Bankrate.