Why Can’t I Find Any Foreclosure Properties Right Now? 

What is a foreclosed property and how does it happen?  

Foreclosure happens when a borrower fails to pay their mortgage payments and the lender or mortgage investor must repossess and then sell the home. Foreclosure can also happen when the homeowner fails to pay their mortgage payment, property taxes, or homeowners association fees. When it comes to understanding foreclosure, there are three important definitions to know: 

• Foreclosure:   the legal process in which a lender or bank takes back unpaid property 
• Home in foreclosure:  a property going through the foreclosure process 
• Foreclosed home or REO:  a property that has gone through the foreclosure process and is now owned by the lender or bank, also known as real estate-owned property (REO) 

Foreclosed homes and REOs are usually of particular interest to buyers since these properties typically come at a lower price than comparable, non-foreclosed homes. The foreclosure rate reached its peak in 2010, just after the financial crisis of 2007-2009. Since then, the rate has steadily fallen. In the lead-up to the financial crisis, the volume of outstanding mortgage debt rose. 

Why did so many foreclosures occur? In 2007-2009, banks were lending money to people who couldn’t afford the houses they were approved for. The market crashed and people were making mortgage payments on homes that were worth a fraction of what they paid. Borrowers couldn’t afford the payments anymore and the bank foreclosed on the properties and sold them to make up for what they were owed.  

Fast forward to 2021, it’s a seller’s market. There is currently an inventory shortage of homes in the US, combine that with low interest rates and the demand outweighs the supply of homes on the market. If you’d like to read more about today’s seller’s market, read our article in the Career Corner here.   

Why are there little, to no, foreclosed homes on the market today? If a borrower is in a position today where they can no longer afford to make their monthly payments, they have the option to sell their home before the bank repossess the property. With the market allowing for homes to be sold at a premium, borrowers can sell their homes with enough profits to pay back the bank and possibly walk away with a profit. Then the borrow can rent or purchase a more affordable home. If you are wondering if you should buy a home in this market, check out our article here that explains what buying a house in a red-hot market looks like today.