8 Steps to Buy a Foreclosed Home in North Carolina (2022 Guide)

Alex Long

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Alex Long

July 22nd, 2022
Updated July 22nd, 2022

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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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Regardless of how experienced you are in real estate, at some point you've probably wondered 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.[1]

But before you consider foreclosures in North Carolina, know that the process can be riddled with extra paperwork or rules that apply in specific circumstances. As such, we recommend you work with a top local realtor who knows how to buy foreclosed homes in your area.

Clever Real Estate can help you find a realtor who can walk you through this complicated process and ensure you get the right house at a fair price. You can also earn a cash-back bonus when you purchase a qualifying home!

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What is a foreclosed home?

A foreclosed home is the result of a person not paying their debt and having their home repossessed to cover that debt. This most commonly occurs 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 on.

A foreclosure auction takes place when the property has officially been foreclosed on and the lender or government tries to sell the property at an auction to recoup the money they're owed.

If a property does not successfully sell at the auction, then it becomes a bank-owned (REO) foreclosure.

How to buy a foreclosed home in North Carolina

1. Get pre-approved for financing

The financing options available depend 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 is 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.

With REOs, the lender may finance the property themselves, but don't assume this will always be the case. They're trying to get these properties off their books quickly, but if they won't finance it, you can usually find other lenders who will.

Buyers should look into the NC Home Advantage Mortgage and NC 1st Home Advantage Down Payment programs to see if they qualify for assistance or special financing terms.

» MORE: Learn if you qualify for special financing in North Carolina

Can you finance a house at a foreclosure auction?

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

The key to getting a good deal with foreclosures is to find the right property early and protect yourself against title issues or surprise expenses. That's why 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 and ensure you don't miss any important deadlines. 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.

The advantages of working with an agent with foreclosure expertise could be the difference between you getting your dream home or not.

Most agents only deal with one or two foreclosures a year, so finding an experienced realtor on your own might not be as easy as it sounds. Talk to a Clever agenttoday to see what they can do to help you navigate the foreclosure process and find your next home.

👋 Find your perfect agent now!

Finding a great local realtor is the first step in making your home buying dreams a reality. Our free service matches you with top agents from trusted brands like Keller Williams and RE/MAX.

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3. Find foreclosed homes in North Carolina

We recommend anyone that isn't an investment professional stick to pre-foreclosures and REOs — these properties are more like traditional home sales and involve less risk.

You can find pre-foreclosures on your MLS (e.g., North Carolina Regional MLS), as well as sites like RealtyTracor Zillow. Usually, you just need to set search filters to focus specifically on foreclosures, pre-foreclosures, or bank-owned properties. You can also find government-owned foreclosures on the HUD home store.

Only seriously consider auctions if you're experienced in real estate, have substantial cash reserves, and are willing to take the risk of buying a home site unseen.

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.

» MORE: Are you an investor who needs more leads on properties? Check out Deal Machine

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 might try bringing in a contractor to give you a sense of what kind of work they think 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 offers on conventional properties — you submit an offer, negotiate terms, and agree on a closing date.

With pre-foreclosures, the biggest difference is the seller is highly motivated to sell before they are foreclosed on, so time is of the essence.

An REO usually has 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 their instructions for submitting offers. A good agent can help you through this process.

If an auction is in person, attend the auction and raise your hand when you want to submit bids. If it's online, you register for the auction and enter your bids electronically.

The auction may have predetermined bid increments, minimum bids, and occasionally buyer's premiums — which are an additional fee.

Buyers should contact the trustee running the auction to ensure they have all these details correct before submitting an offer.

🚨 We strongly encourage you to proceed carefully if you wish to buy foreclosures at an auction. You should consider attending a couple of auctions in person without bidding first to familiarize yourself with the process before submitting bids if this is something you're serious about pursuing.

Also, be aware of the upset period in North Carolina which 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 a highest sale price is reached.

6. Conduct due diligence on the property

Often there are some kind of physical or legal issues with foreclosures. This makes it extremely important that you conduct your due diligence by inspecting the property and running a title search. These 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 be mostly 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 — that's 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 up to 0.5% cash back at closing!

Ready to start looking at North Carolina foreclosures?

The first step is to find a great local realtor who specializes in foreclosure purchases. Our free service connects buyers like you with top-rated agents from trusted brands like Coldwell Banker and Century 21.

Fill out the form below to get personalized agent recommendations sent straight to your inbox!

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 is 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 30-45 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 upon purchase of the property. For example, if you buy a foreclosed property in December, you don't just owe taxes for that month, you owe them for the entire year if they haven't already been paid.

Pros and cons of buying a North Carolina foreclosure

When it comes to buying foreclosed homes, the discounted sale price is usually the biggest drawer to buyers. But there are other advantages as well, 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 issues that need to be navigated 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 situation 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 possibilities.

✅ 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, 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 more smoothly 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 is yours — assuming you ran a title check and it came back clean.

Cons

🚫 Damaged property

Many foreclosures have been vacant or neglected for an extended period, so they may have substantial damage that needs to be repaired. 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 else's misfortune when they buy a foreclosure. In this case, the peace of mind outweighs the potential profit you could achieve by purchasing one of these homes.

🚫 Title issues

For a property to be foreclosed on, 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 this applies to.

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 them 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 is 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, as auctions can be risky and cash-intensive.

Pre-foreclosure

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 nonjudicial 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 to be sold at a foreclosure auction, so be ready to close fast.

Foreclosure auction

If a property doesn't sell during the pre-foreclosure period, it goes to foreclosure auction. Foreclosure auctions must be publicly advertised for at least 21 days before the auction takes place in North Carolina.

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 30-45 days to pay the full amount to the trustee.

Popular areas for purchasing foreclosed homes at auction include:

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, REOs in North Carolina can take anywhere from 6–18 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 either as pre-foreclosures or at auction. That usually means there is 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.

If you think you're up for this kind of renovation, HomeAdvisor can connect you with top local professionals for any home project.

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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.[2]

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.[3] 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 is 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.[4]

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 buyers who are in a hurry focus on pre-foreclosures, as 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 up–front and may need significant rehabbing.

If you do decide to buy a foreclosure, we also recommend working with an experienced agent that can help you get the first crack at great opportunities and avoid money pits.

Consider talking to one of Clever's recommended agents to see how they can help you find and buy your next home.

💰 Find your dream home, get cash back

Why leave extra money on the table? Clever can connect you with one of the top real estate agents in your area, plus put cash back in your pocket.

With Clever:

 ✅ You'll work with a full-service realtor from a top broker

 ✅ You'll earn cash back on qualifying purchases

 ✅ It's free, with zero obligation — you can walk away at any time

Fill out the form below to get started!

Why trust us?

Clever always tries to provide the most up-to-date, accurate, and useful information available for our readers. We have done extensive research to locate and verify this information, and we have also consulted one of our top agents who has experience buying foreclosures in writing this piece.

The author, Alex Long, has been investing in residential real estate since 2016 and has bought homes in various states across the U.S. during that time.

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 sites like Foreclosure.com, RealtyTrac, and Zillow, as well as on the MLS, by searching with foreclosure filters.

North Carolina foreclosure auctions are also required by law to be publicly advertised for at least 21 days in the local newspaper or on a bulletin board in the county courthouse.

For many buyers, feeling like they're profiting from someone else's misfortune makes buying foreclosures not worth it, particularly since they 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 REO with conventional financing, you'll need an inspection and appraisal, so closing will take at least 30-45 days.

REOs in North Carolina can take 6-18 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.

Related links

ARTICLE SOURCES
[1]

The Center Square. "Report: North Carolina mirrors national trend of increasing home foreclosures." Accessed June 28, 2022. Updated April 22, 2022.

[2]

Nolo.com. "North Carolina Foreclosure Laws and Procedures." Accessed June 28, 2022.

[3]

NCleg.gov. "Injunctions; Deficiency Judgments." Accessed June 28, 2022.

[4]

federalreserve.gov. "Protecting Tenants at Foreclosure." Accessed June 28, 2022.

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