How to Buy a Foreclosed Home in Los Angeles (2024 Update)

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By Lindsay Stefan Updated May 3, 2024
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Edited by Hannah Warrick

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Whether you're a property investor, house flipper, or regular home buyer, buying a foreclosed home in Los Angeles can be a good opportunity to get a property for less than market value.

With median California home prices up 6.37% in the past year and mortgage rates on the rise, finding an affordable foreclosure seems increasingly appealing. California has 1 foreclosure for every 3,629 housing units, ranking it #11 across the nation in highest foreclosure rates.

However, the Los Angeles foreclosure market can be notoriously difficult to navigate — especially on your own. Your best chance of getting a bargain is to connect with a local real estate agent who has experience with foreclosures.

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

How to buy foreclosures in Los Angeles

1. Get pre-approved for financing

The first step in buying a foreclosed home is to get pre-approved for a mortgage.

Generally, traditional financing is not an option at foreclosure auctions. Sometimes buyers borrow the money from a family member or from a hard money lender, but usually people purchase these properties with cash.

Financing a pre-foreclosure or REO foreclosure, on the other hand, is a lot like the process with a traditional property. With pre-foreclosures specifically, make sure you're scheduling the sale before the foreclosure deadline.

After reviewing your finances and deciding you qualify, your lender will issue you a pre-approval letter.

Most lenders won't give you a mortgage if the foreclosure you’re targeting isn’t in livable condition. However, if it can pass an inspection, you might be able to take advantage of low-interest, low down payment loans from the USDA, VA, and FHA.

If your lender won’t extend you a mortgage for a Los Angeles foreclosure that’s been deemed non-livable, you could try for a 203(k) FHA loan. This mortgage finances both the purchase price of the property plus up to $35,000 of repairs.

2. Hire a top Los Angeles real estate agent with foreclosure expertise

Every Los Angeles foreclosure is unique. A great Los Angeles real estate agent who specializes in dealing with foreclosures can help you navigate competing claims, clouded titles, and iffy as-is properties. They may even have inside information about foreclosure listings that haven’t hit the open market yet, giving you a head start on finding the perfect foreclosure for you.

Most importantly, a good agent can tell you what to expect from your buying process. Many foreclosure purchases can drag on because of issues with the bank or tangled ownership. This can be anxiety-inducing for a first-time foreclosure buyer, but an agent will be able to tell you if what’s happening is unusual or if it’s par for the course.

Need help finding a Los Angeles 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. Plus, you might qualify for cash back on your foreclosure purchase!

👋 Find your perfect agent now!

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3. Find foreclosed homes in Los Angeles

If you're an inexperienced buyer, we recommend finding pre-foreclosures or REOs, since the process to buy these foreclosed properties is similar to traditional home buying.

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 Los Angeles 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.

Local MLS

Pre-foreclosures and REOs are often listed on the local MLS, which means your agent could alert you before the properties appear on popular real estate sites, like Zillow and Realtor.com.

If you need a real estate agent with experience in foreclosure sales, Clever can quickly match you with realtors in Los Angeles. Enter your zip code here to get started.

Government-owned foreclosures

Some government-maintained databases of foreclosed properties include:

Bank-owned foreclosures

Traditional buyers might be better off looking for real-estate-owned properties. Check the following resources to find REO homes:

Local auctions

California law requires all foreclosure auctions to be advertised to the public for at least three weeks prior to the auction. Typically, this requirement is fulfilled by posting in the courthouse and in local newspaper classifieds.

You can view foreclosure sales from all California newspapers on capublicnotice.com. You can also search for foreclosures in Los Angeles on auction.com.

4. Tour foreclosures in person

If you’re interested in a foreclosed home in Los Angeles, always try to tour it in person before submitting an offer.

You’ll likely be able to tour an REO property and even have it inspected before putting in a bid. However, if you’re buying in pre-foreclosure or in a foreclosure auction, you may not be able to tour it beforehand. Many foreclosures are still occupied by owner-borrowers who, understandably, may not want to cooperate in the sale process. Even if it's an empty foreclosure, these properties are sold "as is" and are not usually accessible to auction bidders or buyers.

If you do manage to tour a foreclosure, look for things like signs of neglect or trespassers, serious damage like burst pipes or a leaky roof, and the quality of the neighborhood.

While you may not have time to order an inspection, you can at least bring a contractor to tour the home with you. You'll get a sense of any major flaws with the property — and what they'll cost to fix. If your goal is to flip the foreclosed property, this is crucial for determining your after repair value (ARV).

» LEARN: How ARV works

At the very least, try to do an exterior examination of any foreclosure you’re interested in. You can also ask the neighbors about potential vandalism or trespassers.

5. Submit offers

Once you’ve decided on a Los Angeles foreclosure, submit a strong offer. Don’t assume the bank will accept a lowball offer just to get the property off its books. Making an offer on a pre-foreclosure is a lot like making an offer on a conventional home — here are some tips that apply:

  • Enclose your mortgage pre-approval: Pre-approval shows you're a qualified buyer.
  • Submit a close-to-market-value offer: While many foreclosure buyers are tempted to submit lowball offers, most lenders today aren't desperate to offload their foreclosed properties.
  • Make a sizable down payment: Putting more money upfront shows you're a serious, safe buyer.
  • Prepare for a long wait: If you're making an offer on a bank-owned property, your offer must move up the chain of command before it can be approved.

Just keep in mind that it may take a while to get a response. If you’re making an offer on a bank-owned property, for example, the bank may need to run the offer by the loan’s actual owners and wait for their approval.

Auctions have their own set of rules for submitting offers. Los Angeles buyers must submit bids in person or online, depending on the foreclosed property being auctioned. The auction will have pre-determined bid increments, a minimum bid, and occasionally a buyer's premium (an additional fee).

🚨 We strongly encourage you to proceed carefully if you want to buy foreclosures at an auction. Consider attending a couple of auctions in person without bidding to familiarize yourself with the process before you start submitting bids.

6. Conduct due diligence on the property

Once your offer has been accepted, you’re now in your due diligence period.

The first step is to have a title company or real estate attorney perform a title review. This review identifies anyone who may have a claim to the foreclosed property. If the title is found to be free of any liens or claims, it’s designated as a "clean title." Just to be safe, you should opt for title insurance, which protects you against any future claims.

In a conventional sale, this is when you’d receive disclosures from the seller — but in a foreclosure, the owner has not occupied the property, and so it can’t provide the standard disclosures. This is another risky aspect of buying a foreclosure.

If possible, get an inspection on the foreclosed home. Government foreclosures have unique rules governing pre-sale inspections, and while you can usually have a bank-owned property inspected, the owners probably won’t accept an inspection contingency. With foreclosure auctions, inspections and property viewings are generally not allowed.

» MORE: Learn how inspections work and what happens after

7. Get the home appraised if you're financing it

Your lender will order a home appraisal to determine if your home is actually worth the amount of the loan. If it’s appraised at less than the loan, your financing may fall through.

There’s an increased risk of this happening with Los Angeles foreclosures because banks will often hire third-party agents to sell their foreclosed properties. These agents may not specialize in the markets where these foreclosures are located, and their list prices could be far off the actual value of the home.

If your foreclosure is appraised below the sale price, don’t despair — you still have a few options:

  • Ask the seller to reduce the price
  • Pay the difference out of pocket
  • Dispute the value with a second appraisal
  • Walk away from the sale (though you risk losing your deposit if you don't have an appraisal contingency)

» LEARN: What to do after a low appraisal

8. Close on the purchase

How do foreclosures work at closing? If you’re paying cash for your Los Angeles foreclosure, and the purchase agreement doesn’t have any contingencies to worry about, closing will be painless and fast. With an auction, funds are due in full at the time you win the foreclosed home. The contract writer will accept your payment and government-issued ID and then complete a certificate of sale. The deed will then be transferred and mailed to you.

Closing on a foreclosure with financing can take a little longer. Lenders usually won’t send a representative to attend the closing in person. Instead, the closing paperwork is mailed to the bank and mailed back once it’s complete. This can add days or weeks to the process.

Another difference from a traditional closing is that the seller — in this case, the bank — probably won’t cover any of the closing costs. While a savvy real estate agent might be able to negotiate a deal for the bank to cover part of the closing costs, don't rely on it.

Since closing on a Los Angeles foreclosure can be complicated, you'll want to have an experienced agent to walk you through the foreclosure sale 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. 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?

When a homeowner falls behind on their mortgage payments or doesn't pay taxes, the lender or government can seize the home — a process called foreclosure.

To recoup their losses, the foreclosing party then sells the property either at a foreclosure auction or on the open market.

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

Pre-foreclosure stage

pre-foreclosure is when a lender or the government issues notice to a homeowner that they must repay their debt or have their house foreclosed.

» MORE: How to buy a pre-foreclosure home (and is it a good idea?) 

Foreclosure auction

foreclosure auction takes place when a property has officially been foreclosed. The lender or government tries to sell the property at an auction to recoup the money they're owed.

REOs

If a property does not successfully sell at the auction, then it becomes a bank-owned (REO) foreclosure.

Pros and cons of buying a Los Angeles foreclosure

Pros

✅ A great price

Buying a foreclosure in Los Angeles can potentially help you buy a top-dollar California home for significantly less than market value.

✅ A clear title

A bank-owned property will likely come with a clear title, as the bank has already solved any liens and claims. You won’t have to worry about claimants coming out of the woodwork months or years later.

Cons

🚫 You’ll have a lot of competition

The truth about buying a foreclosed home in Los Angeles is that many other buyers and investors will be vying for the same bargains you’re looking at. And if those other buyers make a better offer than yours — perhaps even an all-cash offer — you might lose out on that deal.

🚫 Many foreclosures are distressed or come in as-is condition

If you’re buying a foreclosure, the seller isn’t going to patch a leaky roof or replace broken appliances before the sale. You’re buying the property as-is, which means you’ll probably have to put in a lot of work once you get in the property.

Stages of a foreclosure in Los Angeles

As a general rule, a foreclosure in Los Angeles takes 200 days minimum, but most take longer. California unfortunately has one of the longest foreclosure timelines in the U.S.

Pre-foreclosure

The pre-foreclosure period begins after the first missed payment. If the owner-borrower falls 90 days behind on their mortgage, their loan enters default. Federal law dictates that the lender must wait 120 days before serving notice of default.

Once the owner-borrower receives the notice of default, they have 90 days to get current on their mortgage. If they fail to do that, the bank can schedule their home for auction.

Buying a home in pre-foreclosure can yield a great deal, since the seller may want to sell the home as fast as possible so they won’t have a foreclosure on their record.

Foreclosure auction

The foreclosure auction can take place 20 days after the notice of trustee sale was delivered to the owner-borrower. However, a judge or trustee can delay the auction for up to a year, and in California, they often do.

Once the property makes it to auction, it’s sold to the highest bidder. Qualifying to bid involves making a sizable deposit, and the winning bidder has to pay in cash at the close of the auction.

Another important note: if the auction was a non-judicial sale, meaning it wasn’t the result of a lawsuit, the sale is final and irrevocable. However, if it did go through the courts — known as a judicial foreclosure — the former owner has up to a year to reclaim the property by paying off their debts, plus sale costs. For this reason, many investors steer clear of judicial foreclosures.

Bank-owned or real estate owned (REO)

If no bid exceeds the opening bid, the property doesn’t sell and becomes a real estate-owned (REO) property. Now, you'll have to buy it directly from the bank.

Buying a Los Angeles foreclosure directly from a bank requires dealing with a slow-moving timeline. Sometimes, banks just want to get REO properties off their books, no matter the price, and sometimes they’ll insist on near-market value.

A great Los Angeles real estate agent who specializes in foreclosures can help you figure out how to handle your REO purchase!

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Los Angeles foreclosure laws for buyers

California Civil Code Section 2924 is the section of California state law that lays out how to buy a foreclosed home in California, including the timelines, requirements, paperwork, and other specifics. If you're looking for information on foreclosure-prevention measures, you'll want to refer to the California Homeowner’s Bill of Rights.

SB 1079, The Homes for Homeowners, Not Corporations Act

This law took effect in 2021 and makes it easier for people to buy foreclosed properties — even if an investor has already won it at auction. Under this law, anyone who wants to actually occupy a property can submit a competing offer for up to 45 days after an investor won it at auction. If their offer beats the investor’s winning bid, the occupant gets the property.

The Servicemembers Civil Relief Act (SCRA)

This federal law extends foreclosure protections to military service members who were on active duty at the time their property was foreclosed. Military personnel who quality can challenge or reverse their foreclosure for 90 days after they leave active duty, which could complicate some foreclosure purchases.

FAQs about buying a foreclosed home in Los Angeles

How does buying a foreclosed home work in Los Angeles?

A lot like buying a conventional home, with a few crucial differences. If you’re buying a foreclosed home in Los Angeles, you’ll be buying from a homeowner in pre-foreclosure, bidding in a foreclosure auction, or purchasing directly from the bank.

How do you find foreclosures in Los Angeles?

Sites like foreclosure.com and auction.com will provide a list of foreclosure auctions. For bank-owned properties, visit the REO directories at the banks’ own websites. And for pre-foreclosures, you can check popular websites like Zillow. Check out our list of the best foreclosure websites to find more resources.

Are foreclosures worth buying in Los Angeles?

Absolutely! Buying a Los Angeles foreclosure can yield an amazing bargain. Just be prepared for an unconventional, complex, and potentially drawn-out purchase process.

How long does it take to buy a foreclosed home in Los Angeles?

The state of California has one of the longest foreclosure processes in the U.S. with a minimum of 200 days — but it is usually longer. However, how fast your purchase goes depends on how you’re paying, what conditions and contingencies you insist on, and at what stage of foreclosure you’re buying. See more about how long it might take you to close on your home.

Why trust us?

Clever Real Estate has spent hundreds of hours researching foreclosure law and interviewing licensed agents with experience buying foreclosures to create this guide. We utilized authoritative sources including the California Civil Code and the Judicial Council of California.

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.

Note: When you work with one of our partners, we may earn a small commission. Learn more about our editorial policy and how we make money.

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