How to Buy a Foreclosed Home in Maryland (2024 Update)

Whether you're a property investor, house flipper, or regular home buyer, buying a foreclosed home in Maryland can be a good opportunity to get a property for less than market value — if you know how to navigate the Maryland real estate market.

With median Maryland home prices up 3.80% in the past year and mortgage rates on the rise, finding an affordable foreclosure seems increasingly appealing. In this 8-step guide, we'll explain how to buy a foreclosed home in Maryland and help you decide if buying a foreclosed home is right for you.

⚡ Get started: Match with real estate agents (with foreclosure experience) near you.

How to buy foreclosures in Maryland (in 8 steps)

1. Get pre-approved for financing

In the foreclosure market, the type of financing you need depends on the stage of foreclosure. For homes sold at auction, you generally need to pay in cash. But you can buy bank-owned properties and pre-foreclosures with traditional financing from a mortgage lender.

If you plan on financing the home, the first step in how to buy a foreclosed home is to get a pre-approval letter.

• 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 Maryland.

While a pre-approval letter doesn't rope you into working with a specific lender, it does provide sellers with the reassurance that you can secure the funding to back your offer. In a competitive offer situation, proof of funding can make the difference between having the winning bid or not.

You might be able to get a conventional loan if the home is in livable condition. Or, if you qualify, you can even use federally backed FHA, USDA, or VA loans that come with very low interest rates and down payment requirements.

Another option for buyers is a 203(k) FHA loan, which allows the buyer to finance the price of the property plus the cost of repairs with a single mortgage.

2. Find a top Maryland real estate agent with foreclosure expertise

Finding a great Maryland real estate agent who has experience with foreclosed properties can make the process of getting that perfect foreclosure much smoother.

Agents who specialize in foreclosures often have relationships with lenders. This helps them find out about foreclosure listings before they officially hit the market. They’ll understand the dynamics of the Maryland foreclosure market and may even have insight into claims on specific foreclosed properties.

Finally, their experience with the complicated foreclosure process can be an important source of assurance for the buyer.

If you're looking for a Maryland real estate agent with foreclosure experience, Clever's agent matching team can connect you. As a buyer, you get your pick of top-performing agents in your area, plus cash back when you close on your home.

There's no cost and zero pressure. Simply fill out the form below, and we'll send you the profiles of agents who match your needs. You can see what each agent has to offer and decide to move forward (or not) from there.

3. Find foreclosed homes in Maryland

Unless you're an experienced real estate investor with the cash to take to an auction, your best bet for finding foreclosure properties in Maryland is through pre-foreclosure and REO listings. However, competition for these properties can be steep — especially once they reach the multiple listing service (MLS) and other listing sites like Zillow.

Here are a few places you can search for foreclosed homes in the Maryland real estate market.

4. Tour foreclosures in person

Buyers should always try to visit the property and check it out for themselves since these properties are sold as is. Even an exterior walk-around can yield a lot of information, and neighbors can often tell you if the property has been neglected or vandalized.

If you're buying the foreclosure as an investment, you could bring in a contractor to tour with you. They can give you a sense of what kind of work you'll need to do and how much it'll cost. For flippers and real estate investors, this is a crucial step to figuring out the after repair value (ARV).

» LEARN: More about how ARV works

Usually, banks that own REO properties let buyers go into the home before the sale. However, if a foreclosed property is still occupied, the people living there may not agree to let potential buyers tour the home.

Many foreclosed properties are also inaccessible because of neglect or damage, as occupants are often evicted without having a chance to clean up. Also keep in mind that buyers typically cannot tour auctioned foreclosed properties.

5. Submit offers

In Maryland, making an offer on an REO or pre-foreclosure is similar to the offer process for a conventional home purchase. You'll submit an offer, negotiate the sale price and terms, and set a closing date.

How much to offer on a bank-owned property varies. One common misconception about REO properties is that the bank is eager to get the property off its books and will take a lowball offer. Banks are usually savvier than that. Typically, they’ve done their own price research and have a good idea of what the property is worth.

Make your offer stronger by including your own price research on comparable properties, your mortgage pre-approval, and a big deposit.

Once you’ve made your offer, be patient. Banks often move slowly through this process and may come back at you with a counteroffer. This is when working with an agent who’s experienced with negotiating foreclosures can pay big dividends!

For in-person auctions, you'll submit your bids in person by raising either your hand or a bidding card for the auctioneer to see. Some auctions allow absentee bids, which you submit in writing to the auctioneer before the auction. For specific bidding instructions, read the auction advertisement for the property you're interested in. If you can't find the details you need in the advertisement, contact the person conducting the auction.

6. Conduct due diligence on the property

Often foreclosures have some kind of physical or legal issues. It's extremely important to conduct due diligence by inspecting the property and running a title search. These measures will shield you from unexpected issues with the foreclosed home.

» MORE: Learn how inspections work and what happens after

With auctions, inspections and property viewings are generally not allowed. Your due diligence will mostly be limited to checking for a clear title, driving by the property to assess the condition of the outside and neighborhood, and preparing to make an offer at the auction.

Since foreclosed properties 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

Lenders generally require a home appraisal to make sure the home you’re buying is worth what they’re loaning you.

Why are appraisals so important for foreclosures? Lenders who own foreclosed properties often hire outside agents unfamiliar with the local market to sell these properties, and they may misprice the property. Then when the home appraisal comes in under the sale price, the lender could get cold feet.

So what happens if your foreclosure appraisal comes in lower than the sale price? You have several options:

• Ask for a price reduction that's closer to the appraised value.
• Dispute the appraised value by getting your own appraisal.
• Pay the difference if you really want the house.
• Walk away from the sale — just know you may lose your deposit if you didn't have an appraisal contingency.

» MORE: Find out what appraisals are and if you need one

8. Close on the purchase

If you’re paying cash for a foreclosure, with no contingencies in the deal, closing should be fast and easy.

If you’re financing the purchase, the closing process will be similar to a conventional sale’s closing, but you'll likely need to pay all closing costs on your own or try to negotiate otherwise.

One factor that can complicate closing is that many REO properties are owned by banks without a presence in Maryland. In these cases, required paperwork has to be sent to them, make its way through the bank bureaucracy to be signed and approved, and mailed back — a process that can take weeks.

Because closing on a foreclosed property can be complex, we suggest working with an experienced real estate agent who can guide you through the process and review all the relevant documentation.

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 can receive cash back after closing. This free money could be a great way to get started on renovating your foreclosure purchase.

See if you qualify for cash back now!

What is a foreclosed home?

In most cases, a foreclosed home is a dwelling that is seized by the lender or government after an owner fails to keep up with their mortgage payments or taxes. The foreclosing party then sells the home to try and recoup the money still owed to them.

The term "foreclosure" is often used more generally to apply to a property in any stage of the foreclosure process: pre-foreclosure, auction, and real estate owned (REO).

Pros and cons of buying a Maryland foreclosure

Pros and cons of buying a Maryland foreclosure

Pros

✅ Low price

The top reason to buy a foreclosure in Maryland (or any other state) is that you might be able to get it for significantly below market value. In many instances, the lender’s top priority just is to recoup whatever they’re owed on the home and not necessarily get the highest possible sale price.

✅ Title clean and clear

If you’re buying an REO property, the bank has likely already solved the various claims and liens associated with the property. That means you won’t have to shell out any cash to resolve claims from unknown creditors down the line.

Cons

🚫 As-is condition

Nearly all foreclosures are either distressed or sold in as-is condition. Even if you’re able to have the property inspected before you put in an offer, you’ll likely have a lot of work ahead of you once you get the keys.

🚫 Tough competition

There are a lot of other people trying to buy foreclosures for the very same reason you are. Some of those competitors may be investors with deep pockets, and their all-cash, zero-contingency offers could trump yours.

🚫 Accelerated timeline

Because the Maryland foreclosure market is so competitive, you may have to move fast with an offer. You might not have time to have the home inspected or see it in person.

Stages of a foreclosure in Maryland

Pre-foreclosure

How do foreclosures work? The first step is pre-foreclosure — the period after the owner falls behind on their mortgage payments but before the property is officially foreclosed.

Once the owner has gone three months without making a payment, the lender generally gives them 45 days to bring the mortgage current. If they don’t, the lender issues a notice of default and initiates formal foreclosure proceedings after 120 days.

Buying a property in pre-foreclosure can be very advantageous. Sellers are under time pressure to sell before foreclosure devastates their credit rating.

Foreclosure auction

A foreclosure auction takes place after the lender repossesses the property. The property is auctioned off so the lender can recover some of the money still owed to them.

In a foreclosure auction, the property is sold to the highest bidder. Generally, those bidders are investors or deep-pocketed buyers who are paying all cash, so this isn’t a great place for individual buyers to snag a bargain.

Bank-owned or real-estate-owned (REO)

If a foreclosed property doesn’t sell at auction, it becomes a bank-owned or real estate-owned (REO) property. These properties are managed by the institution’s REO department, meaning the selling process often involves navigating several layers of bureaucracy.

Buying an REO property can be unpredictable. Sometimes, the bank just wants to recover its investment and will sell the property at a significant discount. At other times, it may demand a price closer to market value. A good real estate agent who specializes in foreclosures can help you figure out how to handle your REO purchase!

Maryland foreclosure laws for buyers

Maryland condominium and HOA foreclosure law

There are three areas of Maryland state law that govern how homeowners associations and condominium owners associations can foreclose on properties that fall behind on their HOA and COA obligations:

• The Maryland Homeowners Association Act
• The Maryland Condominium Act
• The Maryland Contract Lien Act

In Maryland, the law states that HOAs can foreclose once the homeowner falls 90 days behind on their dues or other fees. In some other states, the lender has first claim on the foreclosure sale proceeds, but in Maryland, the HOA claims are settled first — meaning that HOA foreclosures are relatively common in Maryland.

Protections for military servicemembers

The Servicemembers Civil Relief Act (SCRA) allows members of the military to challenge or even reverse foreclosure sales years later, as long as they file a claim within 90 days of leaving the service. Buyers should be wary of purchasing foreclosed properties that were owned by military service members, as there could be complications.

Should I buy a foreclosed home in Maryland?

The decision of whether to buy a foreclosed home in Maryland 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.

FAQs about buying a foreclosed home in Maryland

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.

We’ve earned buyers’ trust with a rating of 5 out of 5 stars on Trustpilot and over 3,000 customer reviews in total.

Our team of industry-leading researchers is committed to making homeownership more accessible by educating buyers through guides like this one. We've spent thousands of hours analyzing publicly available data, surveying consumers, and interviewing industry experts. Our research has been featured in The New York Times, Business Insider, Inman, Housing Wire, and many more.

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