What 25 years in mortgage lending and real estate have taught me about court-ordered sales.

We've all seen the ads: "Sign up to receive foreclosure listings." "Be the first to know about court-ordered sales." "Get weekly updates on distressed properties." They make it sound like foreclosures are a secret source of bargain-priced homes.

The reality is quite different. Most homeowners facing financial hardship sell their property before the bank begins foreclosure proceedings. Why? Because once the foreclosure process starts, legal fees, unpaid interest, penalties and other costs continue to accumulate. The homeowner typically ends up with less money, fewer choices, and less control over the process.

Banks also generally prefer owners to sell before foreclosure whenever possible. It reduces costs, allows the seller to choose the closing date and showing schedule, and often results in a better outcome for everyone involved.

Foreclosures Are Not Discount Sales

A court-ordered sale does not automatically mean you're getting a bargain. The court's role is to ensure the property has been properly marketed and that fair market value has been achieved as closely as possible.

When I list a foreclosure, I'm required to provide weekly reports detailing the marketing undertaken, the number of showings, buyer feedback, and every offer received. Once an offer is accepted, I prepare a detailed report for the court demonstrating that the property received appropriate market exposure and that due diligence was performed to obtain the best possible price.

Even then, the accepted offer is not necessarily the final sale. The court hearing is public, and the accepted purchase price is disclosed. Other buyers have the opportunity to attend court and submit a higher offer. If they do, the property may be sold to someone else.

Buyer Beware

If a foreclosure appears to be priced significantly below market value, there's usually a reason. Do your homework.

Unlike a traditional sale, the buyer assumes virtually all of the risk. Court-ordered properties are sold as is, where is, with no representations or warranties. If problems arise after closing, your legal remedies are pretty much non-existent. Foreclosures are the very definition of buyer beware.

So Where Are the Best Deals?

If your goal is simply to buy well, there are often better opportunities than waiting for a foreclosure. Study the market. Watch active, pending and sold listings so you understand the price points of where homes are actually selling. Look for properties that have been thoughtfully priced below competing listings or have experienced meaningful price reductions.

The best deals often come from making your offer more attractive rather than simply offering less money:

Have Your Financing Approved

A seller weighing two similar offers will take the one that is least likely to fall apart. Arrange your insurance in advance for the same reason.

Remove Subjects Quickly Where Appropriate

Time is a cost to a seller. Shortening the period of uncertainty has real value, and it costs you nothing if your due diligence is already organized.

Be Flexible on Closing and Repairs

Work with the seller's preferred closing date. And don't ask them to fix every minor issue if you're prepared to handle them yourself.

Here's the secret most buyers miss: price is only one part of a negotiation.

Every seller has pain points. Your job is to identify them and eliminate as many as possible. Do that, and you'll often achieve a better overall deal than someone who simply submits the lowest offer.

After more than 25 years in mortgage lending and real estate, I've seen this strategy succeed time and time again.

— Catherine Worthy

If you're weighing a court-ordered sale, or trying to build a stronger offer on a conventional listing, a short conversation will save you a great deal of guesswork.

This article is general information, not legal advice. Court-ordered sale procedures vary by case. Consult a lawyer before proceeding with a foreclosure purchase.

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