Theresa asks: “Is it possible to buy a foreclosed home directly from the bank before it goes to auction?”
This depends. Each bank handles properties differently but it is unlikely that a bank would ever sell a property to an individual prior to it going on market, through auction or other similar process. Banks use these processes to validate the sale price and ensure they are getting the highest return for an asset. That being said, some asset management companies and banks do sell properties that are in the process of foreclosure on auction sites such as auction.com and xome.com. These often come with the former owner still occupying the property.
Many foreclosures are occupied through the foreclosure timeframe and only result in becoming vacant when the foreclosure is completed by the process of eviction. It is important to read the terms of an auction prior to bidding. It may be the auction buyers responsibility to deal with the former owner.
Lastly, there are many steps prior to a bank owned home where investors are purchasing properties. Note sales are common. These are where an investor purchases a pool of non-preforming mortgages directly from the bank. The investor then becomes responsible for the foreclosure process. Also, depending on the state, there is often a trustee sale or foreclosure auction at the point where the mortgage is in default and ownership returns to the bank for the property. This process depends on the state where the property is located.
The safest way to purchase a foreclosure process is on the open market. When purchasing a property through a normal process, safeguards are generally in-place such as the property being vacant as well as having insured title. Buying prior increases the risk to the buyer.