How to Buy a Foreclosed Home in Washington, DC (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 Washington, DC, can be a good opportunity to get a property for less than market value.

With median Washington, DC, home prices up 4.54% in the past year and mortgage rates on the rise, finding an affordable foreclosure seems increasingly appealing. The District of Columbia has 1 foreclosure for every 2,098 housing units. Considering that DC only has a little more than 350,000 housing units total, not many foreclosures are coming onto the market.

Still, when a DC foreclosure does hit the market, it’s a golden opportunity for a buyer or investor to get a property in a hot market at a big discount. Having a great local real estate agent on your side will help you score the deal.

In this 8-step guide, we'll explain how to buy a foreclosed home in Washington, DC, and help you decide if buying a foreclosed property is right for you.

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

How to buy a foreclosed home in Washington, DC

1. Get pre-approved for financing

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.

Mortgage pre-approval requires you to submit your financial info to your lender. It will then tell you how much of a loan you can take out. Getting a pre-approval letter from your lender is the first step.

Buyers targeting foreclosures in Washington, DC, could access low-interest government-backed mortgage programs from the FHA, VA, or the USDA.

Qualified DC residents can also access special financing like the District’s Home Purchase Assistance Program, which offers home buyers up to $202,000 in financing assistance.

🚨 Can you get financing for a foreclosure auction?

Financing usually isn't an option at foreclosure auctions, unless you're borrowing from a private investor or hard-money lender. It's more common for people to use cash to buy properties at auction. Some experienced investors use a short-term loan to cover the initial purchase and renovations, then refinance the property with a traditional lender.

2. Hire a top Washington, DC, real estate agent with foreclosure expertise

Buyers looking for foreclosures in DC should partner with a top DC real estate agent who has ample experience in the foreclosure market. The right agent can:

  • Let you know about foreclosure listings before they hit the market
  • Advise you on making optimal offers
  • Help you navigate foreclosure auctions
  • Guide you through what can be a long, confusing closing process

Need help finding a Washington, DC, 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. Our agents offer the expertise you need to beat the competition and come out ahead with your offers. (Plus, you might be eligible on cash back on your home purchase!)

👋 Find your perfect agent now!

Finding a great local realtor is the first step in making your home buying dreams a reality. Our free service matches you with top agents from trusted brands like Keller Williams and RE/MAX.

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3. Find foreclosed homes in Washington, DC

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 Washington, DC, real estate market.

Foreclosure.com

To find foreclosed homes for sale in DC, we highly recommend starting your search with a tool that searches for you, like Foreclosure.com. Simply search by state and county to see a list of foreclosed homes near you.

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.

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 your area. Enter your zip code here to get started.

Government-owned foreclosures

Bank-owned foreclosures

Private banks often maintain directories of their bank-owned foreclosure properties:

Local auctions

You can find auctions by flipping to the real estate or legal notices section of your local newspapers or by searching "foreclosures" on auction.com.

Only consider auctions if you are 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

You should always try and tour a foreclosure in person before you put in an offer. But this isn't always possible.

If the foreclosed property is still occupied, the people living there may not be eager to help the sale process along. Even if it's an empty foreclosure, these properties are sold "as is" and are not usually accessible to auction bidders or buyers. However, if a bank-owned property (REO) is being sold on the open market, the listing agent will usually let you tour the property.

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

5. Submit offers

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. To make your offer on your Washington, DC, foreclosure as strong as possible, consider the following:

  • 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.

Auctions have their own set of rules for submitting offers. Washington, DC, 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 the seller accepts your offer, it's time for you to conduct your due diligence.

In a conventional sale, this is when you'd typically receive required disclosures from the sellers. But since the owner of a foreclosure hasn't occupied the property, they won't be able to provide these to you.

To protect yourself, take these four actions:

  • Buy title insurance to protect you if any undiscovered claims on the property emerge after the sale.
  • Order a title review to look into whether there are any legitimate liens or claims on the title. If any are discovered, they'll have to be remedied before the sale can be finalized. The title review is usually done by a title company or a real estate attorney.
  • Order a survey to confirm the property’s boundaries.
  • Get an inspection. With some foreclosures, this may not be possible. 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.

» MORE: Learn how inspections work and what happens after

With auctions, inspections and property viewings are generally not allowed. Your due diligence is mostly limited to checking for a clear title, driving by the property to assess the condition of the outside and the neighborhood, and preparing to make an offer at the auction.

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

Your lender will require an appraisal of your foreclosed property purchase to confirm it's actually worth what it's loaning you. If the appraisal amount is less than your mortgage amount, the sale could fall through.

You'll need to get the property appraised to determine its fair market value. Lenders will generally have appraisers they work with, so you'll just need to contact one of their appraisers, schedule a visit to the property, and notify the seller.

If your appraisal ends up being low, your options include:

  • Getting the price reduced
  • Getting a second appraisal
  • Making up the difference in cash
  • Walking away

8. Close on the purchase

With an auction, you'll need cash or certified funds (i.e., a cashier's check) to close on the property and receive the title. 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.

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. However, some complications can come up.

  • The seller won't cover any closing costs: In a conventional sale, the seller usually meets you halfway and pays a portion of the closing costs. But when buying a foreclosed property, the seller rarely compromises. (An experienced agent may be able to negotiate a better deal.)
  • Closing can take far longer than a day: With a foreclosure purchase, you'll likely have to send the closing paperwork to the seller (usually a bank) and wait for them to review, sign, and return it.

Closing on a Washington, DC, foreclosure can be complex, and there's a lot at stake. Consider hiring a reputable agent to help guide you through the 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?

A foreclosed home is a property that’s been seized (foreclosed on) by the lender, government, or other agency because the borrower-owner fell behind on their mortgage payment, taxes, or other fees.

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.

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 foreclosed home in Washington, DC

Pros

✅ Low price

The main reason to pursue a Washington, DC, foreclosed home is that you can often buy a property for significantly less than market value. This is an especially valuable opportunity in a pricey market like the District.

✅ Clear ownership

If you're purchasing a bank-owned property, the bank has already cleared the title, so you don't have to worry about unknown liens or claims emerging in the future.

Cons

🚫 Foreclosures are sold "as is"

When you buy a home in DC in a conventional sale, you can negotiate with the seller to make repairs before closing. But foreclosures are almost always sold "as is," so any repairs are your responsibility.

🚫 Inspections can be hard to arrange

Since many foreclosures are still occupied or boarded up when they're listed, you may not be able to physically access the property before you submit an offer.

🚫 Some foreclosures are distressed

Disgruntled occupants can vandalize the property shortly before they're evicted via foreclosure, and abandoned foreclosures are sometimes illegally occupied by vagrants.

Stages of a foreclosure in Washington, DC

Pre-foreclosure

The pre-foreclosure process begins after a borrower has missed multiple months of payments and is issued a notice of default by their lender. Here's a quick look at the pre-foreclosure timeline in Washington, DC:

  • The bank mails notice of default to the borrower no more than 36 days after their first missed payment.
  • In the District of Columbia, borrowers can opt for foreclosure mediation within 30 days of receiving the notice of default.
  • If mediation fails, the bank sends a notice of intention to foreclose to the borrower. This notice includes the time of the foreclosure auction. Foreclosure can't happen until a loan has been delinquent for 120 days.
  • In the District of Columbia, borrowers can "reinstate" the loan by paying all back payments and fees up to five days before the auction.

Foreclosure auction

If the owner-borrower doesn't bring their mortgage current by the end of pre-foreclosure, the property is auctioned off to the highest bidder at a foreclosure auction.

While this does theoretically offer an opportunity to snag a bargain foreclosure, these auctions are usually attended by investors who pay all cash, so it can be tough for a conventional buyer to get a deal. In addition, many auction houses require a significant deposit to participate in bidding, which can limit access for buyers.

Bank-owned or real estate owned (REO)

A foreclosed property that fails to sell at auction becomes a bank-owned or real-estate-owned (REO) property.

Many banks contract with real estate agents to sell these REO properties on the open market, though sometimes buyers have to negotiate directly with the bank. Either way, buying a foreclosed property directly from the bank can be a lot more challenging — and frustrating — than buying from an individual seller. The best course of action here is to work with a Washington, DC, real estate agent who has experience with bank-owned foreclosure properties.

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Washington, DC, foreclosure laws for buyers

You'll find the main laws on DC disclosures in DC § 42-815. It covers the rules and timelines for the:

  • 30-day Notice of Intent to Foreclose requirement
  • Public Notice of foreclosure
  • Notice of Default
  • Owner Right of Reinstatement (up until five days before the auction)

Foreclosure mediation

Lawmakers added a new section to DC foreclosure law — § DC 42–815.02. This DC law gives homeowners the right to a mediation process that can halt or delay a non-judicial foreclosure. If you agree to meditation, you have to complete the process with 180 days unless both parties agree to a 30-day extension.

The Servicemembers Civil Relief Act

The Servicemembers Civil Relief Act is a federal law that extends significant foreclosure protections to members of the military. It includes a right of redemption that can reverse a foreclosure after the fact if it took place during the former owner’s active duty.

Should I buy a foreclosed home in Washington, DC?

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 DC real estate agent who can help you find great opportunities and avoid money pits.

FAQs about buying a foreclosed home in Washington, DC

How does buying a foreclosure work in Washington, DC?

Buying a foreclosed home in Washington, DC, is a lot like buying a conventional home — with a few crucial differences. You might have to purchase the property through a foreclosure auction, negotiate a fast deal on a pre-foreclosure, or purchase directly from a bank.

How do you find foreclosures in Washington, DC?

Foreclosures are listed in auction sites, real estate websites like Zillow and Redfin, government directories from Fannie Mae and HUD, and private bank websites. Check out our list of the best foreclosure websites to find more resources.

Are foreclosures worth buying in Washington, DC?

Yes, foreclosures are absolutely worth buying in Washington, DC. Foreclosures can often be purchased for significantly less than market value — a rare opportunity in a hot market like Washington, DC.

How long does it take to buy a foreclosed home in Washington, DC?

Buying a foreclosed home in Washington, DC, can take days, weeks, or months, depending on what stage of the foreclosure process the property is in (pre-foreclosure, auction, or bank-owned), how you're paying for it (cash or financing), and who is selling it (bank or individual). 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 used authoritative sources including the Code of the District of Columbia and the DC Office of Tax and Revenue.

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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