What Types of Properties Can You Buy at a Foreclosure Auction?

This article discusses the different types of properties you can buy at a foreclosure auction and the pros and cons of each.

Single Family Homes

The most popular type of property to be auctioned at a foreclosure auction is the single family home. These are sold at auction in nearly every locale, both in person and online.

Condominiums and Townhomes

Condos and townhomes often go to foreclosure auction for three reasons:

  1. The HOA forecloses due to back HOA dues and assessments
  2. The local tax authority forecloses due to back taxes
  3. The first, second or third mortgage lender forecloses

Condo and townhome foreclosures can be tricky. They often come up very cheap at auctions — $15k for a comparable unit priced at $55k for example. But you must watch out for several “gotchas” with these properties.

Complexities of Foreclosure Auction Condos and Townhomes

Condos and townhomes are often bought by lower income people, single parents, one-half of a divorced couple, and the elderly. These people tend to have one source of fairly limited income, and lots of financial surprises.

This means they can be in default to multiple creditors at the same time (HOA, taxes and bank), not just the mortgage lender.

A condo or townhome owner can have a divorce, face large alimony payments, lose a job, or suffer a major health problem causing huge hospital or drug bills. In these cases, the HOA dues are often first to get paid late or completely stopped. Then the mortgage payments become late, along with property taxes (since those get paid with the mortgage usually).

The HOA’s Role and Importance

In states that allow it, the HOA can foreclose on the condo owner and auction off the property to recover back HOA dues.

Buying a property at an HOA foreclosure auction only clears the back HOA dues. But it’s still subject to any past mortgage and tax liens. So when you see very low prices for these properties at auction, beware that perfecting title will usually require big payments to banks and other creditors.

One other issue to consider is the health of the overall property and the homeowners association finances. If an inspection of the property and tips from other condo owners turn up poor maintenance, non-functioning community items like the pool or clubhouse, or major improvements needed like a roof replacement, then steer clear. That low price could mean buying into a money pit run by a broke HOA!

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Multi-Family Apartment Buildings

Multi-family apartment buildings and multiplexes can also be bought at foreclosure auction. They are fewer in number than houses and condos. There are specialty sites like LoopNet that list them across the country.

Multi-Family Foreclosure Auctions

Multi-unit complexes range from 2 unit duplexes to 100+ unit mega-buildings.

Smaller 4-10 unit properties typically go to foreclosure auction like a house. You must do your own due diligence, inspect the property, do title searches, mechanics lien searches, etc. It’s best to assume that they will have contractors liens, back taxes, and habitability issues. Many of these properties are owned by individuals and family trusts, and are often neglected.

Large apartment buildings at a foreclosure auction tend to have a bankruptcy receiver or trustee whose job is to provide information to potential qualified investors. These properties are typically foreclosed by banks, and may be part of a large bankruptcy proceeding. They can be bought at auction anywhere from $200k to $20 million.

Rehabbing Multi-Family Properties Bought in Foreclosure

Assume when buying a multi-family property at foreclosure auction that it will require substantial rehabilitation. You may also need to work around existing tenants, or even evict them, to get the work done. These are complexities best left to large professional real estate investors.

One good thing about multi-family housing is that special loans, grants or community investment funds may be available to rehabilitate a property. Many cities with low-income populations also have rental subsidy programs. These are intended to revitalize the city and provide healthier living environments.

For example Bridgeport, CT offers investors financial support through structured tenant subsidies. If a building has a certain percentage of low income tenants, then the property owner may be eligible for rental payment support.

Los Angeles, CA offers a Tenant Habitability Program and Primary Renovation Program. The first program is designed to help landlords improve the condition of their properties so they are safer, healthier and meet building codes. The second program is designed to lower costs through city-supported efforts to ensure landlords can earn sufficient returns on low income properties.

Commercial Buildings

Similar to multi-family housing above, commercial properties can range from single standalone auto shop buildings, to strip malls, to massive multi-story buildings.

Types of Commercial Buildings at Foreclosure Auctions

On the low end, you will find small commercial properties in towns across the country at foreclosure auctions. These can include industrial buildings, nurseries, dental office buildings, sandwich shops, storage locations, even entire town blocks. The variety of properties is huge. Small commercial properties can pop up at many local auctions.

On the high end, you find large office buildings, industrial complexes, NNN strip malls, gas stations, agricultural buildings, and many more. The large commercial market is dominated by professional investment firms and REITs.

Finding Foreclosure Auctions for Commercial Properties

To find commercial building foreclosure auctions here are a number of sites to get started:


Unimproved or partially improved land is also available to buy at foreclosure auctions. Since these properties often have limited income potential, they tend to go for much cheaper prices.

With land, it is essential to have a solid short-term flipping or long-term investment strategy in mind before you buy in. This is true whether the land is 2,000 square feet or 100 acres.

Issues With Buying Land at Foreclosure Auctions

Without a solid development plan, bare land tends to be a poor long term investment, even when bought in a foreclosure auction. Here are several reasons why:

  • Property taxes. You will need to pay taxes to the town, county or state based on the value of the land plus any special assessments. If you the land isn’t producing income, this will be negative cash out of pocket.
  • Contamination or Pollution. Land used in the past for commercial or industrial purposes — especially storage of chemicals or vehicles — will often have issues with contamination. Chemicals can leak into groundwater or wash off and pollute nearby streams, rivers or residential properties. Governments are always looking for somebody to clean these problems up, and may impose an obligation to clean up the contamination (a very expensive proposition) before the land can be improved.
  • Legal Liability. Vacant land tends to invite trespassers — often children — who can hurt themselves on the property. They could get cut on metal, fall in a ditch or old well, or even get attacked by an alligator in a swampy area. This means the property must be fenced and patrolled regularly to keep trespassers away. You will need liability insurance as well.
  • Vandalism and Dumping. Unwanted visitors could vandalize buildings or vehicles on the property. They could also use it as their personal dump for garbage, industrial waste, etc.
  • Squatters and Public Rights of Way. In many areas it is possible for non-owners to take full or partial possession of a property by openly living on it or traveling across it on a regular basis. Squatter camps can appear near cities or train tracks. On the west coast, property owners are often required to maintain open rights of way to the ocean for beachgoers. If the property faces a lake, river, ocean, park or wilderness area, or popular destination that the public wants to access, they will often cut across the property. You will need to actively prevent this and cut off access routes, or maintain them in compliance with local laws. These are additional expenses.

Benefits of Buying Land at Foreclosure Auctions

On the upside, there are quite a few buyers looking for cheap land online. These people may be looking to park cash for long periods of time (long term investment), may want to live on the property, or turn it into an income-producing asset (e.g. a plant nursery or storage location), or just want to flip it to the next person willing to buy.

The foreclosure auction market for bare land is quite active for properties priced at $500-10,000. You can buy land cheaply site unseen, and turn around and flip it for substantial profit. You can also seller finance it and turn your cash investment into an income-producing asset.

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