Regardless of how experienced you are in real estate, at some point you might have wondered if buying a foreclosure in Ohio is a good idea.
In many cases, it can be! Buying Ohio foreclosures can help you get a property for under market value, which you can then flip for a profit or live in. And the fact that Ohio consistently has high foreclosure rates means you're more likely to find a great deal.
That said, you need to be careful, since many pitfalls and rules come with buying foreclosures.
Fortunately, Clever Real Estate can connect you with an experienced local agent who knows how to buy foreclosures. Plus, you can earn cash back when you purchase a qualifying home.
What is a foreclosed home?
When a homeowner fails to pay their mortgage or debts that use the house as collateral, the lender can take possession of the property. 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.
A foreclosure auction takes place when the property has officially been foreclosed. The lender or government tries to sell the property at an auction to recoup the money they're owed.
How to buy a foreclosed home in Ohio
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.
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 lender.
A pre-approval letter indicates how much a lender would be willing to let you borrow based on your income, assets, and credit score. Most sellers won't take your offer seriously without one, especially if you're looking to buy an REO.
If you're curious how much you might qualify for, you can get a fast, no-obligation pre-approval using Quicken Loans' free automated tool. Simply fill out some basic financial information, and you'll get a professional opinion of your borrowing power.
A pre-approval letter won't obligate you to work with a specific lender, and it'll give sellers the assurance that they're dealing with a qualified borrower. When multiple offers are on the table, proof of funding can make the difference between winning the deal or not. Once your offer is accepted, you're free to shop around for the best loan.
If you're a first-time buyer, you can also look for down payment assistance programs you might qualify for.
2. Hire a top Ohio realtor with foreclosure expertise
Purchasing a foreclosure can be complex. If you're unfamiliar with the process, find an agent with experience in the foreclosure market.
An experienced agent can point out potential risks, especially when the property needs work or the seller owes more on their mortgage than the home is worth. They'll also help you navigate the paperwork and negotiations. In some cases, your agent may have relationships with REO specialists or other lenders who deal in foreclosures. This can give you an inside track on properties before they hit the market.
If you want to find a realtor with foreclosure expertise in Ohio, try a free service like Clever. Clever will match you with top-performing agents in your area. You could even get cash back when you close on your home!
Finding an agent through Clever is completely free, and there's no pressure to commit. Simply fill out the form below to compare agent recommendations.
3. Find foreclosed homes in Ohio
If you're new to buying foreclosures, you should probably limit your search to pre-foreclosures and REOs. For these 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.
If you're serious about buying a foreclosure, consider signing up for an account with Foreclosure.com. 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.
You can find Ohio foreclosures — including pre-foreclosures and bank-owned properties — by asking your realtor to search for them on your local MLS (e.g., CincyMLS.com).
You can find government-owned foreclosures on the HUD home store. HUD sets aside these listings for seven days before they open to investors. So if you find a home you like, you'll need to act fast. You'll also need to work with a HUD-approved real estate broker (listed in their directory) to submit a bid on your behalf.
If you're a first-time home buyer, you can also use Fannie Mae's HomePath program to purchase a foreclosed property owned by Fannie Mae. To take advantage of the program, you'll need to meet their mortgage requirements and work with a Fannie Mae–approved real estate agent to submit an offer. You'll also need to occupy the home as your primary residence as opposed to using it as an investment.
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
If you decide to stick with Ohio pre-foreclosures and REOs, one major benefit is the ability to see homes in person. Auctioned properties are usually bought sight unseen and as is.
When touring a 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're an 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 an offer
Making an offer on a pre-foreclosure is a lot like making an offer on a conventional home, except the seller is highly motivated and may be trying to close before a foreclosure deadline. Including fast close dates is probably the best way to make these offers appealing to sellers.
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 agent can help you through this process.
Auctions have their own set of rules for submitting offers. Ohio buyers must register on the county sheriff's website and submit bids online. Each auction will have pre-determined bid increments, a minimum bid, and occasionally a buyer's premium (an additional fee). You're also required to submit a deposit at least two days before the auction.
Buyers should contact the sheriff or private selling officer (the person running the auction) to ensure they have all these details correct before submitting an offer.
6. Conduct due diligence on the property
When buying a foreclosure in Ohio, 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.
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 properties is largely the result of the substantial risk buyers take in purchasing them.
7. Get the home appraised if you plan to finance 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.
If the appraisal comes in low, you'll need to come out of pocket for the difference. For example, if you offer $215,000 for a mid-priced Ohio home and it appraises at $210,000, the lender will only finance $210,000. You'll need to cover the remaining $5,000 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 peace of mind knowing an experienced agent has your back — and you could even get cash back at closing!
With an auction, you'll first need to submit a winning bid online for a property. Within the next seven days, the deed will be delivered to the sheriff's office. You must pay for the property in full within 30 days of the sheriff receiving the deed, after which the sheriff has another 14 days to record the deed. You won't be fully closed on your property until the sheriff record's the deed. The entire closing process for auctioned properties can take up to two months.
Pros and cons of buying a Ohio foreclosure
The primary benefit of buying a foreclosed home in Ohio 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
You could get a foreclosed home for below market value. Most sellers are in a tight place financially, and 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 $150,000 and spend $25,000 renovating it, then it could be worth $190,000. That's $15,000 of equity you just created!
✅ Short sales
Ohio allows for deficiency judgments (or short sales), which means a property can be sold for less than is owed on it if the lender agrees to the sale. This can be a good opportunity to pick up a home for less than its fair market value.
✅ Lender pays off debts
Lenders are required to pay off all debts on a property before they can foreclose and resell that property. This means you'll only be responsible for paying the agreed on sale price and any fees associated with buying the home.
🚫 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, 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 foreclosures, 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 need to give tenants 90 days to vacate.
🚫 Redemption period
In Ohio, delinquent borrowers can redeem their property and regain possession of it any time leading up to the confirmation of sale, which can take place up to 30 days after a foreclosure auction. This means you'll have to wait a while before you know for sure you own the property.
Stages of a foreclosure in Ohio
The basic stages of foreclosure in Ohio 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 misses multiple months of payments and is issued a notice of default by their lender. Ohio is a judicial state, meaning that lenders must file a lawsuit against delinquent borrowers and a judge must rule in their favor before the foreclosure process can proceed.
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.
Properties that don't sell in pre-foreclosure go to foreclosure auction. Ohio foreclosure auctions must be publicly advertised in local newspapers for at least three consecutive weeks before the auction takes place.
Ohio auctions are conducted by either the county sheriff's office or a private selling officer, and they're conducted online.
You must submit a deposit between $2,000–5,000 to whoever is running the auction at least two days before it starts. If you submit the winning bid, it'll take approximately two months to complete the sale. The minimum bid on Ohio foreclosures is two-thirds the appraised value of the property.
The funds to close must be either cash or certified funds, and they're due within 30 days of confirmation of the sale. For more detailed instructions, you'll need to read the full description either in the newspaper advertisement or on listing sites like auction.com.
Some of the most popular counties for foreclosure auctions 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 properties for buyers who don't want to take advantage of distressed sellers and don't want the risk of buying site-unseen homes at an auction. That said, you can face significant delays when dealing with REOs, so these properties aren't for buyers in a hurry.
Since REOs have failed to sell in either the pre-foreclosure or auction stages, it's likely there's something wrong with them. You should expect having to do some work on the property.
Ohio foreclosure laws for buyers
From a buyer's perspective, foreclosure laws in Ohio are a mixed bag.
One positive is that Ohio allows for deficiency judgments, or short sales, which increases the possibility of finding a decent property for under fair market value.
Ohio also requires that lenders pay off any debts before selling a property, which makes REOs and auctioned properties less susceptible to lien and title issues.
That said, there are a number of hurdles that make it harder for buyers to get a great deal on a foreclosure. For example, Ohio requires that foreclosed homes be sold for no less than two-thirds of the assessed value, which places a limit on how much you can save on the purchase price.
Ohio also has a redemption period that allows the former owners to pay their debts and the fees associated with foreclosure to regain possession of the property. This means you could win a house at a foreclosure auction only to have it go back to the original owner two weeks later. The redemption period ends when the sale has been confirmed, which can take up to 30 days from the sale date.
Finally, even if you manage to acquire a foreclosed home, you may have to deal with tenants who currently reside there. According to federal law, you must honor the terms of their lease if you intend to rent out the property, or you must give them 90 days to vacate if you plan to live there.
Should I buy a foreclosed home in Ohio?
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 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.
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 Ohio
There are three main stages of foreclosure in Ohio: 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 private selling officer, attending the auction, bidding on a property, and paying for it in cash or certified funds.
For foreclosure auctions, you can look through your local newspapers. Ohio foreclosure laws require auctions to be publicly advertised for at least three weeks before bidding begins.
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.
If you're buying a pre-foreclosure or REO in Ohio, closing will typically take at least 30 to 45 days. This includes the time required to get approved for loan and conduct the usual inspections and appraisals.
Short sales and REOs can take significantly longer, since you'll have to negotiate directly with the bank or seller's lender.
Auctioned foreclosures can take anywhere from a few days to two months to change hands, depending on the circumstances and whether the property is vacant or occupied.
Hondros. "Understanding Ohio's New Foreclosure Procedures." Accessed July 7, 2022. Updated Feb. 1, 2019.
federalreserve.gov. "Protecting Tenants at Foreclosure." Accessed June 28, 2022.
Nolo.com. "Key Aspects of State Foreclosure Law: 50-State Chart." Accessed July 7, 2022.
Ohiosheriffsales.com. "Ohio’s updated foreclosure laws." Accessed July 7, 2022. Updated June 28, 2016.