Last month, there were a total of 30,358 U.S. properties with foreclosure filings, up 143% from a year ago, according to the July 2022 U.S. Foreclosure Market Report from real estate analytics firm ATTOM Data Solutions. (A foreclosure filing means the home was in various stages of the process—one home might have just received a default notice while another might have been repossessed by a bank.)

That increase might sound alarming, but there’s no need to panic. A big reason for such a large spike is that foreclosure activity last year was at an all-time low. Plus, July’s numbers are nowhere near the rate of foreclosures we saw during and directly after the subprime mortgage crisis.

Still though, why are foreclosure filings up?

Many experts attribute the rise in foreclosures to COVID-19 mortgage forbearance programs ending.

“It appears that a few states are still catching up on processing foreclosures on loans that were seriously delinquent prior to the pandemic, which accounts for the year-over-year spike in foreclosure starts,” says Rick Sharga, executive vice president of market intelligence at ATTOM.

Another big factor? Inflation.

“As mortgage deferral programs expire and homeowners face inflationary pricing pressure on necessary items like food and gas, foreclosures are starting to increase,” says Chuck Vander Stelt, a real estate agent and founder of in Valparaiso, IN.

It also appears that these foreclosures aren’t isolated to one part of the country—they’re happening everywhere. About 96% of metropolitan areas saw a spike in foreclosure filings, but the states with the highest rates include Illinois, New Jersey, and Ohio.

So do these foreclosures present more opportunities for buyers to get a good deal? Should you consider purchasing a home that has been foreclosed on? Here’s what you need to know.

How do foreclosures work?

The process of foreclosure is kicked off when a homeowner stops paying the mortgage. Rules vary from state to state, but at a certain point, lenders can seize homes and use them as collateral on unpaid debts.

Typically, after at least one nonpayment, owners are given a written warning. After a second nonpayment, a homeowner is contacted more urgently, as the lender tries to work out a payment plan. After about three nonpayments, the owner is issued an official notice and given 30 days to meet the loan requirements.

If the deadline is not met, a notice of default is issued, also known as a foreclosure notice. At that point, the ball really gets rolling. Once all of the legal obligations are fulfilled and paperwork is filed, a home can officially be foreclosed on. A notice of sale goes up, with information on a minimum opening bid for buyers.

Should buyers seek out foreclosures?

Foreclosures have long been looked at by buyers as an opportunity to get a great deal on a decent house—but it’s not that simple. Foreclosures are not like regular homes that have been put on the market, and there are plenty of potential pitfalls that buyers should be aware of.

If the previous owner was unable to pay the mortgage, other structural issues with the home may have been neglected as well.

“A foreclosed home may have significant structural damage that would be expensive to repair,” says Joshua Haley, founder of Moving Astute in New York. “As a result, homebuyers must do their homework before buying a foreclosure property. They should research the property thoroughly and get a professional inspection to ensure that they are aware of any potential issues.”

Benefits of buying a foreclosure

Foreclosures can offer serious savings, though.

“Buying a foreclosure is a great option for people looking for houses who are unable to find ones within their budget,” says Ben Fisher, a luxury real estate specialist at the Fisher Group in Long Beach, CA. “The average price of a foreclosed home in the U.S. over the last five years has ranged from about $93,000 to $166,000, well below the national average.”

Plus, the process of buying a foreclosure can be faster.

“One of the tedious parts of a typical house purchase is the closing of the house,” Fisher says. “On average, a house takes 50 days to close. But closing on a foreclosure takes about 30 days on average.”

The financial and time savings add up to equity.

“Buying a foreclosure and then renovating it can allow you to increase the home’s value and gain immediate equity,” Fisher says. “If you are a professional investor or just started investing in properties, this is a good way to take part in the business.”

What to do if you decide to buy a foreclosure

To make sure you won’t be stuck with a money pit, hire an inspector to eliminate concerns over structural issues and note any potential acts of recrimination.

“Some people being foreclosed on take their frustration [out] on the house,” says Omer Reiner, a licensed real estate agent and president of FL Cash Home Buyers in Fort Lauderdale, FL. “I have heard stories of owners going into their foreclosure and then pouring cement down the drains so the plumbing is useless, or even setting the house on fire. So make sure to hire an inspector to check the house.”

You should also immediately change the locks.

“A lot of houses nowadays are on master key systems,” says Jeff Tricoli, a broker associate at the Tricoli Team at Keller Williams in Florida’s Palm Beach County. “It means there might be countless contractors, brokers, appraisers, and other people who have the key to your doors. This is why you should protect yourself by installing new locks immediately before you move into your property.”

Where to find foreclosures for sale

Properties in foreclosure can be found everywhere other homes are listed, plus a few other places. Keep in mind that certain venues feature houses with potentially more risk for buyers.

Searches on multiple listing service websites, print magazines, online real estate portals, bank branches and websites, and regional newspapers will all yield foreclosed homes, says Greg Covell, owner of What’s My House Worth and a broker with Re/Max Select Realty.

“Going through websites that are dedicated to houses and properties in foreclosure is a more direct way,” Covell says. “Some financial organizations, including Bank of America, also provide web search pages for foreclosed homes.”

Bank foreclosures can also be sold through auction websites.