Foreclosure Trends: Where the Opportunities Are Right Now

Foreclosures Are Rising — Here Is What It Means

After years of historically low foreclosure activity — driven by government moratoriums, forbearance programs, and a booming housing market — the numbers are climbing. Foreclosure filings have increased significantly year-over-year, and the trend shows no signs of reversing. For real estate investors, this is a development worth watching closely.

Rising foreclosures create opportunity — but not every foreclosure is a good deal, and not every market is affected equally. Understanding the current trends, identifying the best opportunities, and approaching foreclosure investing with the right strategy is essential. At Real Estate Sales LLC, we monitor foreclosure data continuously and help our investors capitalize on the opportunities it creates.

Current Foreclosure Trends

Volume is up but still below pre-pandemic norms. While foreclosure filings have increased significantly from the pandemic-era lows, they remain below the levels seen in 2018 and 2019 — and far below the crisis levels of 2009-2012. The increase represents a normalization, not a crisis.

Geographic concentration. Foreclosure increases are not uniform across the country. States with judicial foreclosure processes (where foreclosures must go through the courts) tend to have longer timelines and are seeing backlogs of deferred cases now working through the system. States like Florida, Illinois, New Jersey, Ohio, and New York are seeing higher activity.

Forbearance exit challenges. Many homeowners who entered forbearance programs during the pandemic are now exiting those programs. While most have successfully resumed payments or modified their loans, a percentage are unable to maintain their mortgage obligations — leading to foreclosure.

Adjustable-rate mortgage resets. Homeowners with adjustable-rate mortgages (ARMs) originated during the low-rate era are seeing payment increases as their rates adjust upward. Some cannot absorb the higher payments, contributing to foreclosure activity.

Types of Foreclosure Opportunities

Pre-Foreclosure (Notice of Default)

Pre-foreclosure is the period after a homeowner has been notified of default but before the property is sold at auction. This is often the best window for investors because you can negotiate directly with the motivated homeowner.

Why it works: Homeowners in pre-foreclosure are desperate to avoid the credit damage and embarrassment of a foreclosure auction. Many will accept below-market offers in exchange for a fast, certain closing that allows them to walk away with some dignity and potentially some equity.

How to find them: Pre-foreclosure notices are public records. Pull notice of default (NOD) or lis pendens filings from your county recorder’s office. Services like PropStream, ATTOM Data, and ForeclosureRadar aggregate this data and make it searchable.

Auction Properties

Properties that complete the foreclosure process are sold at public auction — either at the courthouse steps or on online auction platforms. Auction properties can offer significant discounts, but they come with unique risks.

Potential discounts: Opening bids at foreclosure auctions are typically the outstanding loan balance plus fees and costs. If the property is worth more than this amount, there is an equity opportunity. In cases where no bidders appear, properties can be acquired at deep discounts.

Risks: Limited or no inspection access before the auction, potential title issues (junior liens that survive the foreclosure), and the requirement to pay in cash within 24 to 48 hours. Auction investing requires experience, cash reserves, and thorough title research before bidding.

REO (Bank-Owned) Properties

Properties that do not sell at auction revert to the lender and become REO (Real Estate Owned) properties. Banks then list these properties for sale, usually through an REO-specialized real estate agent.

Advantages: You can inspect the property before buying. Title is usually clean (the bank has addressed liens during the foreclosure process). You can use conventional financing for the purchase. Negotiations follow a more standard process.

Disadvantages: Banks are institutional sellers — negotiations can be slow and bureaucratic. REO properties are listed on the MLS, creating competition from other investors and owner-occupant buyers. Prices are typically closer to market value than pre-foreclosure or auction deals.

Where to Focus Your Efforts

Markets with rising foreclosure rates. Track foreclosure filing data at the county level. Markets seeing the largest increases in filings will produce the most opportunities in the coming months. Services like ATTOM Data Solutions and RealtyTrac publish quarterly foreclosure reports with market-level detail.

Properties with equity. Not every foreclosure is a deal. Focus on properties where the homeowner has significant equity — the market value exceeds the outstanding mortgage balance by enough to create a margin for your investment. Properties with little or no equity may not produce a profitable deal even at foreclosure pricing.

Neighborhoods with strong fundamentals. A foreclosure in a declining neighborhood may continue losing value after you purchase it. Focus on areas with strong employment, good schools, and stable demand — where the property will hold or increase in value after your renovation.

States with shorter foreclosure timelines. Non-judicial foreclosure states (where the process is handled outside the courts) tend to have faster timelines — sometimes as short as 4 to 6 months. This means opportunities move through the pipeline more quickly.

Approaching Foreclosure Investing Ethically

Foreclosure investing involves people in difficult situations. How you conduct yourself matters — both ethically and for your long-term business reputation.

Be honest about who you are. Identify yourself as an investor. Do not pretend to be a nonprofit, a government agency, or anything other than what you are.

Offer genuine solutions. Your offer should solve the homeowner’s problem — not just benefit you. If you can help them avoid foreclosure, protect their credit, and walk away with some money, you are providing real value.

Never take advantage of confusion. Homeowners facing foreclosure are under enormous stress. Make sure they understand the terms of any agreement, encourage them to consult with an attorney, and give them time to make informed decisions.

Follow all laws. Foreclosure investing is regulated. Many states have specific laws governing pre-foreclosure solicitation, required disclosures, and equity protection for homeowners. Know and comply with the laws in your state.

Position Yourself Now

The best time to prepare for foreclosure opportunities is before they peak. Build your systems, build your buyer’s list, and build your knowledge now — so you are ready to act when the volume increases.

At Real Estate Sales LLC, we teach our investors how to identify, analyze, and close foreclosure deals ethically and profitably. Our Flip Cheap Houses program covers every aspect of foreclosure investing as part of a complete deal-finding system.