Whether you're a property investor, house flipper, or regular home buyer, buying a foreclosed home in California can be a good opportunity to get a property for less than market value — if you know how to navigate the California real estate market.
California has the 11th highest foreclosure rate in the U.S. — 1 foreclosure for every 3,629 units. With over 14.4 million housing units in the state, that's a lot of foreclosures. And it's great news for buyers or investors looking for a deal in the nation’s second-most expensive housing market.
In this 8-step guide, we'll explain how to buy a foreclosed home in California and help you decide if buying a foreclosed home is right for you. A good agent can help you navigate the purchase process, tell you what to expect, and help you get your foreclosure purchase across the finish line.
⚡ Get started: Match with real estate agents (with foreclosure experience) near you.
How to buy a foreclosed home in California
1. Get pre-approved for financing
When purchasing a foreclosed home, the type of financing you need depends on the stage of foreclosure. Foreclosure auctions typically require buyers to pay cash. But you can finance a pre-foreclosure or REO property using a traditional home loan with mortgage payments.
If you don't have the cash to purchase a foreclosure outright, you'll need to show proof of financing from another source — such as a pre-approval letter from a mortgage lender.
- A pre-approval letter shows how much you're qualified to borrow based on your credit score and finances.
- Sellers aren't likely to take your offer seriously without pre-approval.
- Use Quicken Loans' free automated tool to start the pre-approval process.
- See if you're eligible for down payment assistance programs in California.
If you’re curious how much you can get pre-approved for, our friends at Rocket Mortgage can send you an estimate right away. Answer a few simple questions to see what you can afford!
If the foreclosure is livable, you can usually take out either a conventional loan or federally backed mortgage programs like FHA, USDA, and VA loans. California buyers can also use state-specific financing programs like California’s MyHome Assistance Program.
🚨 Keep in mind...
Generally, traditional financing is not an option for foreclosure auctions, so you'll need to either borrow from a hard money lender or use cash. Most buyers use their own cash at auctions because of the steep interest rates of hard money loans.
2. Hire a top California real estate agent with foreclosure expertise
Whether you’re looking to buy San Diego foreclosure homes or a foreclosure in Los Angeles, you’ll want to find a local California real estate agent who has experience with foreclosures.
A seasoned foreclosure-centric agent can help you:
- Monitor the fast-paced foreclosure market
- Leverage their professional network to find out about foreclosure listings before the competition
- Understand hyper-competitive foreclosure auctions
- Navigate the long closing process
Working with the right agent can give you some much-needed reassurance and peace of mind as you figure out how to purchase a foreclosed home.
Need help finding a California agent with foreclosure expertise? Clever is here to help. We have a large network of agents that work for brokerages like Century 21, Keller Williams, and more. They can show you how to buy a foreclosed home and provide you with the expertise you need to come out ahead with your offers.
Finding a great local realtor is the first step in making your home buying dreams a reality. Our free service matches you with top agents from trusted brands like Keller Williams and RE/MAX.
Enter your zip code to request hand-picked agent matches in minutes. Compare your options until you find the perfect fit, or walk away with no obligation. Try Clever's free service today!
3. Find foreclosed homes in California
If you're new to buying foreclosures, you should probably limit your search to pre-foreclosures and REOs. For these foreclosure properties, the purchase process is similar to a traditional home sale, allowing you to inspect and appraise the property before you buy. At a foreclosure auction, you'd likely compete with experienced investors and bid on homes sight unseen.
The foreclosure market is tight, and you'll likely face competition. Here are a few places you can search for foreclosed homes in the California real estate market.
Foreclosure.com
Foreclosed homes can be difficult to track down. We highly recommend starting your search with a tool that does the searching for you, like Foreclosure.com. Simply search by state and county to see a list of foreclosed homes near you.
This platform gives you access to the most comprehensive foreclosure marketplace on the internet — and often has new pre-foreclosure and REO listings before they hit a wider market. If you want to "test before you buy," you can get a free preview before proceeding to a monthly subscription.
Local MLS
You can find California foreclosures — including pre-foreclosures and bank-owned properties — by asking your realtor to search for them on your local MLS.
Only licensed real estate agents have access to the MLS, but you can ask your agent to alert you before the properties are syndicated to popular real estate sites.
If you need an agent with experience in foreclosure sales, Clever can match you with top real estate agents in California. Enter your zip code here to get started!
Government websites
To find the right foreclosure, you'll have to search government or bank foreclosure directories. These list all homes that have been foreclosed on by the government or lender.
Leading government foreclosure directories include:
- The U.S. Department of Housing and Urban Development (HUD) home store
- The Department of the Treasury’s list of IRS-repossessed foreclosures
- Fannie Mae’s HomePath
Sources of bank-owned or REO foreclosures include:
Local auctions
In California, state law requires all foreclosure auctions be advertised to the public for at least three weeks before the auction. This is usually done by publishing a classified ad or posting in the local courthouse. You can search and view foreclosure announcements from all California newspapers at capublicnotice.com.
Seriously consider auctions only if you're experienced in real estate, have substantial cash reserves, and are willing to take the risk of buying a home sight unseen.
4. Tour foreclosures in person
Touring a foreclosure in person before you submit an offer is always a good idea, as it will give you a sense of the strengths and potential problems of the property. But properties in different phases of the foreclosure process offer different levels of accessibility.
- In pre-foreclosure: Buyers are often desperate to sell, so it’s possible they’ll let you take a look at the property if it will help close the sale. But they may also be unhappy about being forced out of their home — and not excited about enabling the process.
- At foreclosure auction: You’ll rarely be able to inspect foreclosure auction properties in person. Many of these properties are still occupied, and those occupants won't want to help the bank sell their homes. Other properties may be abandoned or dilapidated and are being sold "as is."
- Bank-owned (REO) property: These properties are usually sold on the open market with a real estate agent, so they’re usually very easy to tour in person.
When touring a foreclosure property, look for red flags. These might include significant damage to the foundation, evidence of harmful substances, or multiple distressed properties in the area. You can get an inspection later to get a more comprehensive idea of issues with the property, but this initial visit will tell you if it's even worth pursuing. If you can’t tour the property in person, drive or walk by to see if the home has been vandalized or is currently occupied.
If you're a real estate investor, you should probably have a contractor assess how much work they think needs to be done on the home and what it'll cost. This step is crucial for determining the after repair value (ARV) of the home, which can help you determine your potential profit when reselling the home.
» LEARN: How ARV works
5. Submit offers
Submitting an offer on a California foreclosure is a lot like submitting an offer on a conventional home. Here are some tips to make your offer competitive:
- Don’t lowball: The bank very likely knows what the property is worth on the market and is probably not desperate to offload it for pennies on the dollar.
- Include your mortgage pre-approval letter: Your offer will be stronger if the seller knows that financing won’t fall through.
- Put as much money down as possible: A sizable down payment signals you’re a serious buyer.
- Be patient: If you’re buying from a bank, several different people and departments will need to sign off on the sale.
REOs usually have more specific rules for submitting offers. Each lender treats this a bit differently, but you'll want a letter of pre-approval, and you should always follow their instructions for submitting offers. A good real estate agent can help you through this process.
6. Conduct due diligence on the property
If and when your offer is accepted, the due diligence period begins.
When buying foreclosed properties in California, it's extremely important to protect yourself from additional risk. Getting the property inspected and conducting a title search are two of the most effective ways to protect you from most legal and physical issues.
» MORE: Learn how inspections work and what happens after
You usually aren't allowed to tour or inspect an auctioned foreclosure. Most of the due diligence for these properties involves driving by the property, researching the tax history, and learning about the surrounding area. Ultimately, the discount on these foreclosed properties is largely the result of the substantial risk buyers take in purchasing them.
Since foreclosed homes only exist when bills aren't paid, there's an additional risk of claims against the title. Conducting a title search ensures that there aren't liens against the property, so you can rest assured that the home is yours once you close.
7. Get the home appraised if you're financing it
Whenever a lender loans someone money to buy a property, the lender want assurances that their money is being invested wisely. That's why they usually require a formal appraisal to determine the property's fair market value.
» MORE: Find out what appraisals are and if you need one
This is a special risk with foreclosures since they’re often priced and sold by agents unfamiliar with the area.
If your appraisal comes in low, you’ll have a few options:
- Ask the seller to the lower the price to the appraised value.
- Make up the difference out of pocket.
- Ask for a different appraisal.
- Cancel the sale.
» MORE: What to do after a low appraisal
8. Close on the purchase
If you’re paying cash, closing should be fast and easy. If you’re not, here are some of the differences between closing on a foreclosure in California and a conventional closing:
- Closing can take a while: The bank won’t send a representative to the closing. Instead, you’ll have to mail the closing documents to the bank and wait for them to return them.
- Seller won’t cover closing costs: The bank has little incentive to share closing costs. That will leave you, the buyer, paying most or all of them.
- Closing may not be final: If you’re an investor, the law in California allows nonprofits and occupant-buyers to buy the property out from under you within 45 days.
Closing on a foreclosure in California can be confusing, so it’s wise to work with an experienced real estate agent who can help you navigate the process.
When you use Clever to find an agent, not only will you get a highly experienced professional, but you could also qualify for cash back. Eligible buyers will receive cash back after closing, which is a great way to get started on renovating your foreclosure purchase.
Buy your investment property with a top local realtor from a trusted brand like Keller Williams or RE/MAX. Get cash back on eligible purchases.
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What is a foreclosed home?
Foreclosure happens when a borrower misses their mortgage payments or fails to pay their taxes or other debts owed for the home. The lender, government, or other organization can seize and take ownership of the property to recoup their losses.
Once an organization forecloses on a home, it usually sells the property to recover its investment. Usually, this comes in the form of a foreclosure auction or real-estate-owned (REO) sale.
Pros and cons of buying a foreclosed home in California
Pros
✅ You could get a bargain
In California, where the average home is worth more than twice the U.S. average home value, foreclosures are a chance to get an affordable home. Your odds of getting a deal are better if you search in one of California's top investment markets.
✅ You'll likely have a clean title
If you buy an REO property, the bank has already untangled the many claims and liens on the property. That means you can buy with confidence.
Cons
🚫 You could lose the property — even after closing
SB 1079, a state law passed in 2021, allows nonprofits and individual occupant-buyers to step in and supersede an investor’s winning bid or offer for up to 45 days. In addition, judicial foreclosures in California can be reversed for up to a year if the former owner pays off what they owe, plus sale costs.
🚫 Many foreclosures are in poor condition
Because they’ve been neglected or even vandalized by disgruntled occupants, many foreclosures are distressed. Foreclosures are typically sold "as is."
🚫 It's a competitive market
In a real estate market as expensive as California’s, there are a lot of other people looking for a deal.
🚫 It could take a long time to buy
California has one of the lengthiest foreclosure processes in the U.S., taking a minimum of around 200 days — and often dragging out for months or years.
Stages of a foreclosure in California
Pre-foreclosure
Pre-foreclosure is the period before the bank or government takes ownership of the home. The timeline breaks down like this:
- First mortgage payment is missed: Pre-foreclosure begins
- Mortgage falls 90 days behind: Loan enters default
- 120th day after the first mortgage payment is missed: Lender can legally serve notice of default
- After notice of default: Owner has 90 days to get current on mortgage, or lender can schedule house for auction
Buying a house in pre-foreclosure can yield a great deal since the seller likely just wants to sell quickly to avoid foreclosure. But as you can see from the timeline above, you’ll be on the clock to close the deal.
Foreclosure auction
In California, a foreclosed property can be auctioned off 20 days after the notice of trustee sale is delivered to the borrower. However, many foreclosures in California are delayed for up to a year, or even longer.
At a foreclosure auction, the property is sold to the highest bidder.
Bank owned or real estate owned (REO)
If a foreclosure doesn’t sell at auction, it becomes a real-estate-owned (REO) or bank-owned property.
Buyers purchase these properties directly from the lender or bank, which can be difficult. Banks have layers of bureaucracy that each have to approve a sale, and ownership of these foreclosure properties can be muddled. If you’re looking to buy an REO property, you’d be wise to partner with an experienced California agent who can let you know what to expect.
California foreclosure laws for buyers
California Civil Code Section 2924 is the main section of California state laws that define how the foreclosure process works. However, there are a few other laws that provide useful context on buying California foreclosures.
The California Homeowner’s Bill of Rights (HBOR)
Passed in 2012, HBOR applies to nonjudicial foreclosures of residential properties and offers homeowners specific protections against foreclosures. It defines foreclosure-prevention options and also gives tenants the right to stay in the home, even after the sale, if they had a pre-existing fixed-term lease.
The Homes for Homeowners, Not Corporations Act (SB 1079)
Passed in 2021, this SB 1079 law allows individuals and nonprofits to overrule an investor’s winning bid or offer on a foreclosure for up to 45 days — meaning that they can essentially take the property from the investor for up to a month and a half after the sale is ostensibly finalized.
The Servicemembers Civil Relief Act (SCRA)
SCRA offers foreclosure protections to military service members, including a generous right of redemption that can reverse a foreclosure months or years after the fact.
HOA foreclosures and the right of redemption
In California, homeowners associations (HOAs) can foreclose on homes that fall behind on dues. However, former owners have a 90-day right of redemption during which they can reclaim the property by paying off their debts. In certain cases involving a judicial foreclosure, they may have up to a year!
Should I buy a foreclosed home in California?
The decision of whether to buy a foreclosed house depends on your circumstances and the type of foreclosure you're interested in.
We recommend that buyers in a hurry focus on pre-foreclosures, since these properties are more likely to close quickly and allow conventional financing.
Buyers who want to work with professionals should consider REOs. These transactions go slower, but REO departments handle foreclosures all the time and have a tried-and-true method of selling them.
Unless you're a professional investor, flipper, or contractor, we recommend avoiding auctions. Auctioned foreclosures usually require substantial cash up front and may need significant rehabbing. The fact that you may end up inheriting tenants with the property also makes these more appropriate for real estate professionals.
If you decide to buy a foreclosure, work with an experienced real estate agent who can help you find great opportunities and avoid money pits.
🔎 Browse Clever's agent network to find a realtor who can guide you through the process.
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Clever's service is 100% free, with zero obligation. Interview as many agents as you like until you find the perfect fit — or walk away at any time.
FAQs about buying a foreclosed home in California
How does buying a foreclosed home work in California?
If you’re buying a foreclosed home in California, you’ll buy from a homeowner who’s in pre-foreclosure, bid on a property at a foreclosure auction, or purchase a foreclosed property directly from a bank. Learn more about the pros and cons of buying a bank-owned foreclosure.
How do you find foreclosures in California?
To find pre-foreclosures, search for the keyword "pre-foreclosure" on sites like Zillow or Redfin. To find foreclosure auctions, search online directories like Auction.com. And for bank-owned properties, survey lists of REOs on major bank websites. Check out our list of the best foreclosure websites to find more resources.
Are foreclosures worth buying in California?
For many buyers, feeling like they're profiting from someone's misfortune makes buying foreclosures not worth it, particularly since the homes may need additional work.
That said, foreclosures can result in below-market sale prices and opportunities for sweat equity, so they can be worth it to patient buyers who wait for the right property.
Learn more about how to decide if buying a foreclosed home is right for you.
How long does it take to buy a foreclosed home in California?
How long it takes to buy a foreclosed home in California depends on how you’re paying (cash buys are fastest), what phase of foreclosure the property is in (auction purchases are instantaneous), and who you’re buying from (for example, buying from a bank takes the longest). See more about how long it might take you to close on your home.
Why trust us?
Clever strives to provide the most up-to-date, accurate, and useful information available for our readers. We've done extensive research to locate and verify this information, and we've also consulted one of our top agents who has experience buying foreclosures.
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