On the path to homeownership, you might wonder if buying a foreclosure in Massachusetts is a good idea.
Buying a foreclosure could be a way for you to find an affordable home. The median home price climbed to $579,000 in 2022, but you could pay below average on a foreclosure. This is especially appealing in a growing state like Massachusetts, where competition can be tough, making deals hard to find.
That said, buying a Massachusetts foreclosure is a complex process with many pitfalls to avoid.
Fortunately, Clever Real Estate can connect you with an expert agent will can show you how to buy a foreclosed home in Massachusetts. You could even get cash back for qualified purchases!
What is a foreclosed home?
A foreclosure happens when a homeowner fails to pay their mortgage or other debts that use the house as collateral. The lender takes possession of the borrower's home as compensation.
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).
A 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.
A foreclosure auction takes place when the property has officially been foreclosed. The lender or the government tries to sell the property at an auction to recoup the money they're owed.
If a property does not successfully sell at the auction, then it becomes a bank-owned (REO) foreclosure.
How to buy a foreclosed home in Massachusetts
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.
Regardless of the stage of foreclosure, good deals get snatched up quickly — often by cash investors. If you don't have the cash to buy a foreclosure property outright, be prepared to show proof of financing from another source. The best place to start is with a pre-approval letter from a lender.
A pre-approval letter states how much you're qualified to borrow based on a lender's review of your credit score and finances. Your offer isn't likely to be taken seriously without one.
To get a head start on the pre-approval process, you can use Quicken Loans' easy automated tool. Simply answer a few basic financial questions and get a professional opinion of how much you're qualified to borrow — with no obligation to commit to a lender. You can also check your eligibility for down payment assistance programs in your area.
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 can explore other affordable mortgage and down payment assistance options through MassHousing.
2. Hire a top Massachusetts realtor with foreclosure expertise
Buying a foreclosure can be a difficult, drawn-out process. Having an experienced agent who knows how to navigate the Massachusetts foreclosure market can make a world of difference — especially when it comes to pointing out potential red flags, decoding complicated paperwork, and ensuring you don't overpay.
Agents specializing in foreclosures may even have established relationships with the REO departments of local lenders. This can give you the inside track on foreclosed homes that others might not know about.
If you're looking for a Massachusetts realtor 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 Massachusetts
Unless you're an experienced investor with the cash to take to an auction, your best bet for finding foreclosure properties 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.
If you want to get ahead of competitors, services like Foreclosure.com can give you access to local foreclosure listings — including pre-foreclosures and government-owned properties — before they hit the market.
While there's a monthly fee for using the service, Foreclosure.com has the largest and most up-to-date database of foreclosure properties on the internet, with listing information updated twice daily. You can access the database during a seven-day free trial before deciding to pay for the service.
You can find foreclosures on your local MLS (e.g., Mass Live). Usually, you need to set search filters for foreclosures, pre-foreclosures, or bank-owned properties.
However, 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.
If you're not a real estate professional, we recommend you stick to pre-foreclosures and REOs. These are more like traditional homes and involve less risk since you can usually tour them and get them inspected.
4. Tour foreclosures in person
Seeing the property yourself will help you know what you're signing up for. This step is especially important since foreclosures are usually sold as is.
During the tour, keep an eye out for any deal breakers such as a cracked foundation, dilapidated roof, or faulty major appliances. If you see anything you don't want to fix or pay for, you can end the tour and move on to another property.
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 investors, this is a crucial step to figuring out the after repair value (ARV).
» LEARN: More about how ARV works
5. Submit offers
In Massachusetts, making an offer on an REO or pre-foreclosure is similar to the process for a conventional purchase. You'll submit an offer, negotiate the sale price and terms, and set a closing date.
Since pre-foreclosure owners are motivated sellers, you're more likely to get your offer accepted if you're able to close quickly.
REO departments are not as crunched for time, and they have more specific rules about how to submit offers and negotiate. You can expect less of a discount on REOs than pre-foreclosures, especially when the lender hasn't possessed the property for very long. A good agent can help you navigate the complicated process of making an offer on an REO.
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 property.
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.
7. Get the home appraised if you plan to finance it
If you're borrowing money to buy a foreclosure, you'll need an appraisal to determine the fair market value. An appraisal tells the lender how much to lend you for the property.
If the appraisal comes in low, you'll need to come out of pocket for the difference. For example, if you offer $510,000 for a mid-priced Massachusetts home and it appraises at $500,000, the lender will only finance $500,000. You'll need to cover the remaining $10,000 or renegotiate the sale price.
8. Close on the purchase
The closing process for pre-foreclosures and REOs is similar to closing on conventional homes. You go to a title company, fill out the paperwork, and pay the seller for the property.
The title company will tell you in advance what's expected from you, but it helps to have an expert on your side to guide you. If you use an agent recommended by Clever, you'll have the peace of mind knowing an experienced agent has your back — and you could even get cash back at closing!
If you're closing on an auctioned foreclosure, you need to pay for the house in full and file the deed at the Registry of Deeds. You have 30 days to complete these steps, otherwise you lose ownership of the property and any deposit you submitted.
Pros and cons of buying a Massachusetts foreclosure
The primary benefit of buying a foreclosed home in Massachusetts is the likely discounted price. Buyers also appreciate the increased inventory to choose from and the possibility of quickly gaining equity by renovating the property.
The major risks with foreclosures include damage to the property and title issues.
✅ Lower purchase price
The major benefit of buying a foreclosed home is the possibility of getting it for below market value. Most sellers are in a tight place financially, so savvy buyers can leverage that to negotiate lower sale prices.
✅ Increased inventory
In a competitive market, any opportunity to add homes to your search increases the chances of finding the right property. Considering foreclosures is a good way to expand your search.
✅ Room to build equity
Since many foreclosures have issues or have been neglected in some way, there's often an opportunity to build equity by renovating or repairing the home.
For example, you might buy a foreclosure for $200,000 and spend $25,000 renovating it, and it could be worth $250,000 after all the work is done. That's $25,000 of equity you just created!
✅ Short sales
Massachusetts allows for deficiency judgments, which means a property can be sold for less than is owed on it if the lender agrees to the sale — also called a short sale. This can be a good opportunity to pick up a home for less than its fair market value.
✅ No redemption period
Not having a redemption period means you can rest assured that when you buy a foreclosed home, it's yours — assuming you ran a title check and it came back clean.
🚫 Damaged property
Many foreclosures have been vacant or neglected for an extended period, so they may have substantial damage that needs repair. Sometimes distressed sellers intentionally damage property on the way out because they're angry about being forcefully removed from their home.
🚫 Ethical concerns
Some home buyers feel like they're taking advantage of someone's misfortune when they buy a foreclosure. In this case, the peace of mind outweighs the potential profit you could get by purchasing one of these homes.
🚫 Title issues
For a property to be foreclosed, a homeowner must fail to repay a debt for which the property is acting as collateral. This can apply to more than one kind of debt.
For example, a homeowner could fail to pay their taxes as well as their mortgage to their lender. In this case, both the government and the lender have a claim to the property — also known as a lien.
When buying a foreclosure, always run a title check to see who has a lien on the property and to ensure the title is clean.
🚫 Inheriting tenants
Due to the Protecting Tenants at Foreclosure Act of 2009, you're required by federal law to honor the lease for tenants in a property if you buy a foreclosure and intend to rent it out. If you plan to live there, you still need to give tenants 90 days to vacate.
🚫 Buyer beware
Massachusetts is a buyer beware state, meaning that sellers of foreclosures aren't obligated to disclose all information about what is wrong with the property. This creates a greater risk for buyers, since there could be hidden issues and expenses.
Stages of a foreclosure in Massachusetts
The basic stages of foreclosure in Massachusetts are pre-foreclosure, auction, and REO property. We recommend that you stick to pre-foreclosures and REOs if you're not a professional investor, since auctions can be risky and cash-intensive.
The pre-foreclosure process begins after a borrower has missed multiple months of payments and is issued a notice of default by their lender. Massachusetts is a non-judicial state, meaning that lenders can foreclose properties with delinquent payments much quicker than in judicial states.
In Massachusetts, a homeowner gets 150 days to catch up on their loan payments. The time can be cut down to 90 days if the homeowner doesn't respond to the lender's notification of intent to foreclose.
Being able to close fast enough to beat the foreclosure deadline is the key to successfully buying pre-foreclosures. You'll want to be pre-approved for financing before you find a pre-foreclosure you're interested in, or you'll need non-traditional financing that processes faster than traditional loans.
If a property doesn't sell during the pre-foreclosure period, it goes to foreclosure auction. In Massachusetts, foreclosure auctions must be advertised in a local newspaper for at least three consecutive weeks before the auction takes place.
Auctions can take place at the county courthouse or at the property itself, and they're conducted by a licensed auctioneer.
If you submit the winning bid, you have 30 days to register the deed and pay in full for the property.
Counties where foreclosure auctions are common include:
Real estate owned (REO) foreclosures
If a property doesn't sell at auction, the lender or government takes possession of it. These properties are called REOs.
REOs are good for buyers who don't want to take advantage of distressed sellers and who want to see the property before buying. That said, buyers can face significant delays when purchasing these properties, so if you're in a hurry to buy a home, don't go for an REO.
Since REOs have failed to sell in both the pre-foreclosure and auction stages, it's likely there's something wrong with them. Approach these properties with the expectation that they'll require some work.
Massachusetts foreclosure laws for buyers
From a buyer's perspective, the foreclosure laws in Massachusetts are a mixed bag.
One the one hand, Massachusetts is a non-judicial foreclosure state, meaning lenders don't have to file a lawsuit to foreclose the property. This makes the process faster and less complicated.
There's also no redemption period, so when you close on a foreclosure, it's yours and can't be taken back by the original owner.
That said, Massachusetts is one of the few buyer beware states, which means sellers are not obligated to disclose everything wrong with the property like most states do.
Federal law requires a buyer of a foreclosure to honor the lease for tenants when the buyer intends to rent out the property. If the buyer intends to live in the foreclosed home, they must give tenants 90 days to vacate. However, Massachusetts also requires buyers to evict anyone wrongfully occupying an auctioned property. If a buyer doesn't carefully follow the instructions, they're liable to being sued for up to three years by the people evicted.
Should I buy a foreclosed home in Massachusetts?
Buying a Massachusetts foreclosure can be a good idea if you get it at the right stage for the right reasons.
Pre-foreclosures are good opportunities to find a property in reasonable shape for a discount. You'll need to be willing to close relatively quickly, but you could get a great deal without significantly more risk or effort than buying a conventional home.
An REO can be a good option if you want to work with professionals and minimize the feeling that you're profiting from someone's distress. That said, REOs likely need significant work, and the process of buying them can take a while.
Auctions are usually best left to investors and contractors. These properties come with significant risk, are cash intensive, and often require lots of knowledge and labor. If you don't mind spending a lot of money on a high-risk, high-reward investment, these could be worth exploring.
If you decide to buy a foreclosure, we recommend working with an experienced agent who can help you find great opportunities and avoid money pits.
Tap into Clever's agent network to find the right realtor to help you buy your next 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.
The author, Alex Long, has been investing in residential real estate since 2016 and has bought homes in various states across the U.S.
FAQs about buying a foreclosed house in Massachusetts
There are three main stages to foreclosure in Massachusetts: pre-foreclosure, foreclosure auctions, and real estate owned (REO) foreclosures.
Buying pre-foreclosures or REOs is a lot like buying conventional homes — you find a property, make a written offer, negotiate terms and price, and then close.
Buying foreclosures at auctions requires registering with the county sheriff's office or a trustee, attending the auction, bidding on a property, and paying for it in cash or certified funds.
You can find foreclosures and pre-foreclosures on Foreclosure.com, often before they hit traditional listing sites. Or your realtor could set up a search filter for foreclosures on the local MLS.
You can also check your local newspaper, since Massachusetts laws require foreclosure auctions to be publicly advertised for at least three weeks.
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. They can be worth it to patient buyers who wait for the right property.
If you're buying a pre-foreclosure or REO in Massachusetts with conventional financing, you'll need an inspection and appraisal, so closing will take at least 30 to 45 days. However, short sales can take two or three times that long.
You have 30 days after an foreclosure auction to pay for and close on the property.
Mass Legal Help. "Foreclosure Sale/Auction." Accessed July 11, 2022. Updated July 2013.
federalreserve.gov. "Protecting Tenants at Foreclosure." Accessed June 28, 2022.
Russell & Associates. "Foreclosure Process in Massachusetts." Accessed July 11, 2022.
Nolo.com. "Massachusetts Foreclosure Laws and Procedures." Accessed July 11, 2022.
Nolo.com. "Selling a Massachusetts Home: What Are My Disclosure Obligations?." Accessed July 11, 2022.