On the path to homeownership, many buyers wonder if buying a foreclosure in Massachusetts would be a good idea.
In a growing state like Massachusetts, competition can be keen, making deals increasingly difficult to find. With the median home price climbing all the way to $588,000 in 2022, foreclosures could be a way for buyers to find a home they can afford.
That said, buying a Massachusetts foreclosure is a complex process with numerous pitfalls you'll want to avoid.
Fortunately, Clever Real Estate can connect you with expert agents who can show you how to buy a foreclosed home in Massachusetts like a pro. You might even be able to get some cash back for qualified purchases!
What is a foreclosed home?
When a homeowner fails to pay their mortgage or other debts that use the house as collateral, the lender can take possession of the borrower's home to compensate them — this is called a foreclosure.
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 on.
A foreclosure auction takes place when the property has officially been foreclosed on and the lender or 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
If you don't have the cash to buy a property outright, you'll have to acquire financing. It's best to knock this out right away so you know exactly what you can afford. Having a pre-approval letter will also make your offers more competitive and allow you to close faster.
A fast close could be the difference between successfully purchasing a pre-foreclosure or not, and most REO departments won't even consider an offer that doesn't have proof of funds.
2. Hire a top Massachusetts realtor with foreclosure expertise
One of the most overlooked advantages in this market is having an experienced agent who knows how to buy foreclosures in Massachusetts.
Finding this person might not be as easy as it sounds though. Most agents only do one or two foreclosure transactions a year — if any — so having the right agent could make a world of difference in your search for a foreclosed property.
Agents with foreclosure experience might even have established relationships with the REO departments of local lenders. This can give you the inside track on a constantly replenished pool of foreclosed homes that others might not know about.
Fortunately, Clever already has a network of partner agents with experience buying foreclosures in Massachusetts. Talk to a Clever agent today to see what they can do to help you navigate the foreclosure process and find your next home.
3. Find foreclosed homes in Massachusetts
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.
You can find pre-foreclosures on your local MLS (e.g., Mass Live), as well as sites like RealtyTrac or Zillow. Usually, you just need to set search filters to focus specifically on foreclosures, pre-foreclosures, or bank-owned properties. You can also find government-owned foreclosures on the HUD home store.
Only seriously consider auctions 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
Seeing the property yourself is an important step in making sure you know what you're signing up for. This is especially important since foreclosures are usually sold "as is."
During the tour, you'll want to keep an eye out for any deal breaker issues such as a cracked foundation, dilapidated roof, or faulty major appliances. If you see anything you don't want to fix or pay for, then you can stop there and move on.
If you're buying the foreclosure as an investment, you might bring in a contractor to give you a sense of what kind of work they think 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 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, it's more likely you'll be able to close a good deal fast. Being able to close quickly will be a major help in getting your offer accepted.
REO departments are a bit less time crunched, and they have more specific rules about how to submit offers and negotiate. You should expect to get less of a discount on REOs than pre-foreclosures, especially if the lender hasn't possessed it very long. A good agent is helpful in navigating the complicated process of making offers on REOs.
For in-person auctions, you will submit your bids in person, either by raising your hand or a bidding card to signal the auctioneer that you wish to bid. Some allow absentee bids, which you would submit in writing to the auctioneer before the auction. The auction advertisement should have specific bidding instructions for the property you're interested in — if not, contact the person conducting the auction for detailed instructions.
6. Conduct due diligence on the property
Often there are some kind of physical or legal issues with foreclosures. This makes it extremely important that you conduct your due diligence by inspecting the property and running a title search. These will shield you from unexpected physical or legal 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 the money to buy your next foreclosure, you'll need an appraisal to determine the fair market value. This tells the lender how much they are willing 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 up to 0.5% cash back at closing!
Closing on an auctioned foreclosure requires you to pay for the house in full and file the deed at the Registry of Deeds. You have 30 days to complete these steps or ownership of the property and any deposit you may have submitted will be lost.
Pros and cons of buying a Massachusetts foreclosure
The primary benefit of buying a foreclosed home in Massachusetts is the discounted price you expect to get. 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 are damage to the property or title issues, though other downsides do exist.
✅ 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 situation 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 possibilities.
✅ Room to build in equity
Since many foreclosures have issues or have been neglected in some way, there's often an opportunity to build in equity by renovating or repairing the home.
For example, you might buy a foreclosure for $200,000, 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 available
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 is 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 to be repaired. There are also occasions when 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 else's misfortune when they buy a foreclosure. In this case, the peace of mind outweighs the potential profit you could achieve by purchasing one of these homes.
🚫 Title issues
For a property to be foreclosed on, a homeowner must fail to repay a debt for which the property is acting as collateral. However, there can be more than one kind of debt this applies to.
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 foreclosures, always run a title check to see who has a lien on the property and 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 them 90 days to vacate.
🚫 Buyer beware
Massachusetts is a buyer beware state, meaning the sellers of foreclosures are not obligated to disclose all information about what is wrong with the property. This creates a greater risk for hidden issues and expenses that would need to be disclosed in other states.
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, as 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 on properties with delinquent payments much quicker than in judicial states.
You'll want to be pre-approved for financing before finding a pre-foreclosure you want to buy, or you'll need non-traditional financing that processes more quickly than traditional lenders. Being able to close fast enough to beat the foreclosure deadline is the key to successfully buying pre-foreclosures.
In Massachusetts, a homeowner gets 150 days to catch up on their loan payments, but this can be cut down to 90 days if the homeowner isn't responsive to the lender when they notify the owner of intent to foreclose.
If a property doesn't sell during the pre-foreclosure period, it goes to foreclosure auction. Foreclosure auctions must be advertised in a local newspaper for at least three consecutive weeks before the auction takes place in Massachusetts.
These sales can take place at the county courthouse or at the property itself, and they are 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 the property — these are called REOs.
REOs are good properties for buyers who want to avoid taking advantage of distressed sellers or the risk of buying sight unseen homes at an auction. That said, there can be significant delays in dealing with REOs, so these are not for buyers who are in a hurry.
Since REOs have failed to sell either in the pre-foreclosure or auction stages, it's likely there's something wrong with them. You should approach these with the expectation of having to do some work on the property.
If you're ready to tackle a real fixer-upper, HomeAdvisor can connect you with top local professionals for any home project.
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 on the property. This makes the process faster and less complicated.
There is also no redemption period, so when you close on a foreclosure, it's yours and cannot be taken back by the original owner.
With that said, Massachusetts is one of the few buyer beware states, which means sellers are not obligated to disclose everything wrong with the property the way most states do.
Federal law requires buyers of foreclosures to honor the lease for tenants of a foreclosure if they buy it as an investment, or allow 90 days to vacate if you intend to live there. However, Massachusetts also requires you to evict anyone wrongfully occupying an auctioned property, and if you don't carefully follow the instructions, you are liable to being sued for up to three years by the people you evict.
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. If you're willing to close relatively quickly, these can offer great deals without significantly more risk or effort than buying a conventional home.
REOs are nice if you want to work with professionals and minimize the feeling that you're profiting from someone else's distress. That said, REOs have failed to sell in the pre-foreclosure or auction stages, so they likely need significant work. These homes might not be for you if you're in a hurry or aren't willing to invest substantial time and money.
Auctions are probably 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 have an increased tolerance for risk and 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 get the first crack at great opportunities and avoid money pits.
Consider talking to one of Clever's recommended agents to see how they can help you find and buy your next home.
Why trust us?
Clever always tries to provide the most up-to-date, accurate, and useful information available for our readers. We have done extensive research to locate and verify this information, and we have also consulted one of our top agents who has experience buying foreclosures in writing this piece.
The author, Alex Long, has been investing in residential real estate since 2016 and has bought homes in various states across the U.S. during that time.
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 sites like Foreclosure.com, RealtyTrac, and Zillow, as well as on the MLS, by searching with foreclosure filters.
Massachusetts foreclosure auctions are also required by law to be publicly advertised for at least three weeks in the local newspaper.
For many buyers, feeling like they're profiting from someone else's misfortune makes buying foreclosures not worth it, particularly since they 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 to come along.
If you're buying a pre-foreclosure or REO with conventional financing, you'll need an inspection and appraisal, so closing will take at least 30-45 days. Short sales have been known to take as much as two or three times that long, however.
You have 30 days after the date of the auction to pay for and close on an auctioned foreclosure.
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.