There are several ways to buy distressed properties–prior to foreclosure, on the courthouse steps, or from the bank that owns them (these are called REO properties, or Real Estate Owned by the bank). Contrary to what many believe, buying at auction isn’t usually the cheapest way to purchase foreclosures. At this point, the lender has not gone through the process of valuing the property and preparing it fore sale–so the reserve price is often equal to what is owed.

And today’s foreclosure properties are often so over-financed that they aren’t worth what is owed. So by assuming that an auction is automatically a good deal , you could end up paying more for a home than it’s worth. Not to mention the disadvantage of having to pay cash, deal with possible title issues, and the fact that many sales don’t allow the inspection of the property. And that’s why many many foreclosure sales go on and no one even shows up to bid.

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