What is a foreclosed home? | Pros and cons | Stages of foreclosure | North Carolina foreclosure laws | Should I buy a foreclosure? | FAQs
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At some point you might wonder if buying a foreclosure in North Carolina is a good idea. In many cases, it can be!
Buying North Carolina foreclosures can help you get a property for under market value, which you can then flip for a profit or live in. And the North Carolina foreclosure market is growing — the number of foreclosed homes was up 102% from the previous year.
⚡ Just looking for foreclosed homes in North Carolina? Gain instant access to local listings before they hit the market on Foreclosure.com!
How to buy a foreclosed home in North Carolina
1. Get pre-approved for financing
The financing options available for a foreclosed home depends on what stage of foreclosure the property is in.
Usually, you can get traditional financing for pre-foreclosures and REOs, as long as the property meets the lender requirements. For example, some lenders won't fund a loan to buy a house that's in total disrepair.
When buying a pre-foreclosure, you may be operating in a tight timeframe to help the seller avoid foreclosure, so you'll want to move quickly and have the financing lined up in advance.
Need a professional to help you navigate foreclosure financing? You can fill out a short profile using Quicken Loans' automated tool and gain access to customized help for your situation.
If you want to search for financing in North Carolina on your own, you can look into the NC Home Advantage Mortgage and NC 1st Home Advantage Down Payment programs to see if you qualify for assistance or special financing terms.
Financing is usually not 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 North Carolina realtor with foreclosure expertise
Working with an agent who has experience buying foreclosures is imperative. The right agent will help you find great opportunities before other buyers are aware of them. They may even have a relationship with the REO departments of your local lenders, which would give you an inside track on a consistent pool of properties.
Your agent will also ensure you don't miss any important deadlines and help protect you from title issues or surprise expenses.
If you're searching for a realtor who specializes in foreclosures, we recommend using a free service like Clever. Clever matches you with experienced local agents who can help you find the right property. You can also get cash back when you close.
Requesting agent matches is free, and there's no obligation. Simply fill out the form below to get agent recommendations sent straight to your inbox!
3. Find foreclosed homes in North Carolina
Unless you're an investment professional, we recommend you stick to pre-foreclosures and REOs. Buying one of these properties is more like a traditional home sale and involves less risk.
The simplest way to find foreclosures in North Carolina is to use a service like Foreclosure.com. You'll gain instant access to foreclosure listings near you before they hit the mass market.
Pre-foreclosures and REOs are typically listed on the local MLS (e.g., North Carolina Regional MLS). To access the MLS, you'll need to work with a licensed real estate agent who can alert you before the properties appear on popular real estate sites.
If you need an agent who's experienced in foreclosure sales, Clever can match you with realtors in your area. Enter your zip code here to get started.
You can find auctions listed in the real estate or legal notices section of your local newspapers or by searching "foreclosures" on ncnotices.com and auction.com.
Consider auctions only if you're experienced in real estate, have substantial cash reserves, and are willing to take the risk of buying a home site unseen.
4. Tour foreclosures in person
Since foreclosures are usually sold as is, it's important to try and see them before submitting an offer. With pre-foreclosures or REOs, you can usually see the property in person and have it inspected. This isn't an option at auctions, meaning you have no idea what you're in for.
If you don't have time to order an inspection, you could bring in a contractor to give you a sense of what kind of work you'll need to do and how much it'll cost. For flippers and investors, this is a crucial step to figuring out the after repair value (ARV).
» LEARN: More about how ARV works
5. Submit offers
Making an offer on a North Carolina pre-foreclosure or REO is similar to making an offer on a conventional property: you submit an offer, negotiate terms, and agree on a closing date.
With a pre-foreclosure, the seller is highly motivated to sell before the house is foreclosed, so you'll want to be prepared to submit an offer quickly.
If you're looking at an REO, there are usually more specific rules for submitting offers. Each lender treats this a bit differently, but you'll want a letter of pre-approval, and you should always follow the lender's instructions for submitting offers. A good agent can help you through this process.
For an auction, if it's in person, attend the auction and raise your hand when you want to submit bids. If it's online, register for the auction and enter your bids electronically.
The auction may have predetermined bid increments, minimum bids, and occasionally buyer's premiums (an additional fee). Buyers should contact the trustee running the auction to ensure they have all these details before submitting an offer.
🚨 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.
Also, be aware of the upset period in North Carolina that gives other buyers 10 days to outbid the winning bid by at least 5%. If someone outbids the highest auction bid, the 10-day period resets and continues until the highest sale price is reached.
6. Conduct due diligence on the property
There are often some kind of physical or legal issues with foreclosures. It's extremely important to conduct due diligence by inspecting the property and running a title search. These measures will shield you from unexpected physical or legal issues with the property.
» MORE: Learn how inspections work and what happens after
With auctions, inspections and property viewings are generally not allowed. Your due diligence will mostly be limited to checking for a clear title, driving by the property to assess the condition of the outside and neighborhood, and preparing to make an offer at the auction.
7. Get the home appraised if you plan to finance it
If you need financing to buy a house, you'll need to show the lender that the investment is worth it. This is where appraisals come in.
» MORE: Find out what appraisals are and if you need one
If the appraisal comes in low, you'll need to come out of pocket for the difference. For example, if you offer $315,000 for a mid-priced North Carolina home and it appraises at $300,000, the lender will only finance $300,000. You'll need to cover the remaining $15,000 or renegotiate the sale price.
8. Close on the purchase
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.
The title company will tell you in advance what's expected from you, but it helps to have an expert on your side to guide you. If you use an agent recommended by Clever, you'll have the peace of mind knowing an experienced agent has your back — and you could even get cash back at closing!
Auctions are a bit more complicated. If you submit a winning bid, you need to provide the trustee with a certified check — usually 10% of the purchase price — as a deposit.
Then a Report of Sale will be filled out and filed at the county clerk's office. However, there's still a 10-day upset period when someone can outbid you.
If you make it through the upset period without being outbid, you'll need to deliver the full amount of the sale to the trustee, usually within 30 to 45 days.
🚨 Don't forget the taxes!
In North Carolina, taxes due on a property are NOT prorated, so you'll have to pay the full amount due on them when you purchase the property. For example, if you buy a foreclosed property in December, you don't just owe taxes for that month — you owe taxes for the entire year if they haven't already been paid.
What is a foreclosed home?
A home is foreclosed when a borrower doesn't pay their debt and has their home repossessed to cover that debt. This occurs most commonly when someone fails to pay their mortgage, taxes, or both.
The term "foreclosure" is often used more generally to apply to a property in any stage of the foreclosure process: pre-foreclosure, auction, and real estate owned (REO).
A 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.
A foreclosure auction takes place when the property has officially been foreclosed and the lender or government tries to sell the property at an auction to recoup the money they're owed.
Pros and cons of buying a North Carolina foreclosure
For buyers, the biggest draw to foreclosed homes is usually the discounted sale price. But there are other advantages, particularly in competitive markets.
That said, you need to be aware of the risks that come with these properties. Title issues and physical damage are just a couple of the problems you might come across when you buy foreclosures in North Carolina.
✅ Lower purchase price
The major benefit of buying a foreclosed home is the possibility of getting it for below market value. Most sellers are in a tight place financially, so savvy buyers can leverage that to negotiate lower sale prices.
✅ Increased inventory
In a growing state like North Carolina, any opportunity to add homes to your search increases the chances of finding the right property. Considering foreclosures is a good way to expand your search.
✅ Room to build in equity
Since many foreclosures have issues or have been neglected in some way, there's often an opportunity to build in equity by renovating or repairing the home.
For example, you might buy a foreclosure for $150,000 and spend $25,000 renovating it, and it could be worth $190,000 after all the work is done. That's $15,000 of equity you just created!
✅ Faster buying process than some states
Since North Carolina is a non-judicial state, the foreclosure process goes much quicker and smoother than in judicial states. It also makes the process of buying a foreclosure significantly less complicated for interested buyers.
✅ No redemption period
Not having a redemption period means you can rest assured that when you buy a foreclosed home, it's yours — assuming you ran a title check and it came back clean.
🚫 Damaged property
Many foreclosures have been vacant or neglected for an extended period, so they may have substantial damage that needs repair. There are also occasions when distressed sellers intentionally damage property on the way out because they're angry about being forcefully removed from their home.
🚫 Ethical concerns
Some homebuyers feel like they're taking advantage of someone's misfortune when they buy a foreclosure. In this case, peace of mind outweighs the potential profit you could achieve by purchasing one of these homes.
🚫 Title issues
For a property to be foreclosed, a homeowner must fail to repay a debt for which the property is acting as collateral. However, there can be more than one kind of debt.
For example, a homeowner could fail to pay their taxes as well as their mortgage to their lender. In this case, both the government and the lender have a claim to the property — also known as a lien.
When buying foreclosures, always run a title check to see who has a lien on the property and to ensure the title is clean.
🚫 Inheriting tenants
Due to the Protecting Tenants at Foreclosure Act of 2009, you're required by federal law to honor the lease for tenants in a North Carolina property if you buy a foreclosure and intend to rent it out. If you plan to live there, you still need to give tenants 90 days to vacate.
🚫 Upset period
Although North Carolina doesn't have a redemption period for previous owners to re-take possession of their property, it does allow anyone to outbid your winning bid at an auction within 10 days if it's at least 5% over your bid.
Stages of a foreclosure in North Carolina
The basic stages of foreclosure in North Carolina are pre-foreclosure, auction, and REO property. We recommend that you stick to pre-foreclosures and REOs if you're not a professional investor, since auctions can be risky and cash-intensive.
The pre-foreclosure process begins after a borrower has missed multiple months of payments and is issued a notice of default by their lender. Most lenders in North Carolina choose non-judicial foreclosures because they can foreclose on properties with delinquent payments much quicker than in the judicial process.
The pre-foreclosure window may be as little as 90 days before the property is scheduled for a foreclosure auction, so be ready to close fast.
If a property doesn't sell during the pre-foreclosure period, it goes to foreclosure auction. In North Carolina, foreclosure auctions must be publicly advertised for at least 21 days before the auction takes place.
These sales usually occur at the county courthouse or online. You can find the details of where and when on the posting that alerted you to the auction.
If you submit the winning bid, you'll need to give the trustee a certified check for the deposit, which is usually 10% of the winning bid. Then you have to wait 10 days to see if anyone outbids you during the upset period before you pay the full amount and receive the title to the property.
Generally, you have 30 to 45 days to pay the full amount to the trustee.
Popular areas for purchasing foreclosed homes at auction include:
- Wake County (Raleigh)
- Guilford County (Greensboro)
Real estate owned (REO) foreclosures
If a property doesn't sell at auction, the lender or government takes possession of the property — these are called REOs.
REOs are good properties for buyers who want to avoid taking advantage of distressed sellers or the risk of buying site-unseen homes at an auction. That said, there can be significant delays in dealing with REOs, so these are not for buyers who are in a hurry.
In fact, in North Carolina it can take anywhere from 6 to 18 months for a property to complete the foreclosure process and be moved to an REO department.
» MORE: Learn about HomeSteps for financing REOs in North Carolina
Another important thing to remember is that REOs have failed to sell as pre-foreclosures or at auction. That usually means there's something wrong with them.
As such, buyers should be prepared to do substantial renovations on the property, regardless of whether they want to rent it, flip it, or live in it.
North Carolina foreclosure laws for buyers
The foreclosure laws in North Carolina generally favor the buyers, though not always.
North Carolina foreclosures are usually non-judicial, meaning the properties do not require the lender to sue the borrower. This makes the process go much smoother and faster.
Deficiency judgements are available to lenders, which means they can accept lower payment on a foreclosed property than is owed on it — also called a short sale. However, banks can take weeks or even months to respond to a short sale offer, so don't expect this to happen quickly or easily.
There's no redemption period for the previous owner of a foreclosure in North Carolina, but the 10-day upset period following a foreclosure auction allows anyone, including the former owner, to outbid the winner by at least 5% to gain ownership of the property.
Due to the Protecting Tenants at Foreclosure Act, investors who buy properties with tenants in place must honor the original lease. Anyone who intends to live in the home must give the current tenants at least 90 days to vacate the property.
Should I buy a foreclosed home in North Carolina?
The decision to buy a foreclosed house or not depends on your circumstances and the type of foreclosure you're interested in.
We recommend that buyers who are in a hurry focus on pre-foreclosures, because those are more likely to close quickly and allow for conventional financing.
Buyers who want a standardized experience working with professionals should consider REOs as a primary focus. These transactions go slower, but REO departments handle foreclosures all the time and have a tried-and-true method of selling them.
Avoid auctions unless you're a professional investor, flipper, or contractor. Auctioned foreclosures usually require substantial cash upfront and may need significant rehabbing.
If you decide to buy a foreclosure, we recommend working with an experienced agent who can help you get the first crack at great opportunities and avoid money pits.
Reach out to one of Clever's recommended agents to see how they can help you find and buy your next home.
Why trust us?
Clever strives to provide the most up-to-date, accurate, and useful information available for our readers. We've done extensive research to locate and verify this information, and we've also consulted one of our top agents who has experience buying foreclosures.
The author, Alex Long, has been investing in residential real estate since 2016 and has bought homes in various states across the U.S.
FAQs about buying a foreclosed house in North Carolina
There are three main stages to foreclosure in North Carolina: pre-foreclosure, foreclosure auctions, and real estate owned (REO) foreclosures.
Buying pre-foreclosures or REOs is a lot like buying conventional homes — you find a property, make a written offer, negotiate terms and price, and then close.
Buying foreclosures at auctions requires registering with the trustee, attending the auction, bidding on a property, and paying for it in cash or certified funds.
You can find foreclosures and pre-foreclosures on Foreclosure.com. You can also find them on the MLS by searching with foreclosure filters, but you'll need a licensed real estate agent to help you access the MLS.
You can also check your local newspaper or the bulletin boards in the county courthouse for foreclosure auctions, because the law requires North Carolina foreclosure auctions to be publicly advertised for at least 21 days.
For many buyers, feeling like they're profiting from someone's misfortune makes buying foreclosures not worth it, particularly since the homes may need additional work.
That said, foreclosures can result in below market sale prices and opportunities for sweat equity, so they can be worth it to patient buyers who wait for the right property to come along.
If you're buying a pre-foreclosure or an REO in North Carolina with conventional financing, you'll need an inspection and appraisal, so closing will take at least 30 to 45 days.
REOs in North Carolina can take 6 to 18 months just to complete the foreclosure process and reach the REO department.
Auctions have a 10-day period when you can be outbid. After that, you can pay in full and receive the title in days.
The Center Square. "Report: North Carolina mirrors national trend of increasing home foreclosures." Accessed June 28, 2022. Updated April 22, 2022.
Nolo.com. "North Carolina Foreclosure Laws and Procedures." Accessed June 28, 2022.
NCleg.gov. "Injunctions; Deficiency Judgments." Accessed June 28, 2022.
federalreserve.gov. "Protecting Tenants at Foreclosure." Accessed June 28, 2022.