Regardless of how experienced you are in real estate, at some point you've probably 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 that there are likely to be plenty of opportunities for you to find a great deal.
That said, you need to know what you're doing, as there are many pitfalls and rules that come with buying foreclosures.
Fortunately, Clever Real Estate can connect you with an experienced local agent who knows how to buy foreclosures in Ohio. Plus, you can also earn a cash-back bonus when you purchase a qualifying home.
What is a foreclosed home?
When a homeowner fails to pay their mortgage or debts which 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 Ohio
1. Get pre-approved for financing
Having a letter of pre-approval will tell you what your price limit is, and it'll also make your offers more competitive. This is particularly true when multiple offers have been submitted.
In the case of REOs, most lenders won't even consider your offer unless you have a pre-approval letter.
Since most pre-foreclosure sellers are in a hurry to avoid foreclosure, being pre-approved will not only make your offer more appealing, but it'll also improve your odds of closing the deal on time.
2. Hire a top Ohio realtor with foreclosure expertise
Buying a foreclosed home in Ohio can be a complicated process. That's why hiring an agent who has experience with foreclosures can make all the difference. They help you navigate the additional risks, effectively negotiate with motivated and distressed sellers, and avoid missing important deadlines.
It's also possible your agent will have a relationship with REO departments of local lenders or other entities who deal with foreclosed homes. Having the inside track could mean being the first person to put in an offer on a great property.
Most agents only deal with one or two foreclosures a year, so finding an experienced realtor on your own might not be as easy as it sounds. Talk to a Clever agenttoday to see what they can do to help you navigate the foreclosure process and find your next home.
3. Find foreclosed homes in Ohio
Buyers who are new to foreclosures should probably stick to REOs and pre-foreclosures — these properties are more like traditional home sales and can be inspected before you buy them.
You can find Ohio pre-foreclosures on your MLS (e.g., CincyMLS.com), 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.
We recommend you 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 site 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, you'll want to look for any red flags that rule it out. 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 give 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 come out during or after your visit to provide an assessment of how much work they think needs to be done and what it will cost. This 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: More about 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.
An REO usually has 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 before participating and submit bids online. The auction will have pre-determined bid increments, minimum bids, and occasionally buyer's premiums — which are an additional fee. They also require a deposit to be submitted at least two days before the auction.
Buyers should contact the sheriff or private selling officer 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 is extremely important that you protect yourself from additional risk. Getting the property inspected and conducting a title search are two of the most effective ways to do that, as they'll protect you from most legal and physical issues.
Auctioned foreclosures don't usually allow buyers to get inside the home, let alone have it inspected. Most of the due diligence in auctions 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, they 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 the peace of mind knowing an experienced agent has your back — and you could even get up to 0.5% cash back at closing!
With an auction, you will first need to submit a winning bid online for a property, after which the deed will be delivered to the sheriff's office in the next seven days. 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 all of this has taken place, which 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 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 $150,000, spend $25,000 renovating it, and it could be worth $190,000 after all the work is done — that's $15,000 of equity you just created!
✅ Short sales available
Ohio 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.
✅ Lender has to pay off debts
Lenders are required to pay off all debts on a property before they can foreclose and resell that property, which means you'll only be responsible for paying the agreed upon sale price plus any fees when you buy it.
🚫 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.
🚫 Redemption period
In Ohio, delinquent borrowers can redeem their property and regain possession of it anytime 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, 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. 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 not sold 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 either conducted by the county sheriff's office or a private selling officer, and they are conducted online.
A deposit between $2,000–5,000 must be submitted to whoever is running the auction at least two days prior, and if you submit the winning bid, it will 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 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 site-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.
Ohio foreclosure laws for buyers
Foreclosure laws in Ohio are mixed from a buyer's perspective.
One positive is Ohio allows for deficiency judgments, or short sales, which increases the possibility of finding a decent property for under fair market value.
Also, Ohio 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 the property, or give them 90 days to vacate if you plan to live there.
Should I buy a foreclosed home in Ohio?
The decision to buy a foreclosed house or not depends on your circumstances and the type of foreclosure you're interested in.
We recommend buyers who are in a hurry focus on pre-foreclosures, as those are more likely to close quickly and allow for conventional financing.
Buyers who want to work with professionals should consider REOs as a primary focus. These transactions go slower, but REO departments handle foreclosures all the time and have a tried-and-true method of selling them.
We recommend you avoid auctions unless you're a professional investor, flipper, or contractor. 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, we recommend working with an experienced agent that 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 Ohio
There are three main stages to 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.
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.
Ohio 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.
REOs can take significantly longer if the REO department has a lot on its plate.
Auctioned foreclosures can take anywhere from a few weeks to two months to complete the sale.
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.