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Why this article is important: As foreclosure numbers increase, the time is fast coming for real estate agents to refresh their knowledge on foreclosure sales and alternative lender conduct.
More foreclosures and foreclosure starts
A growing number of foreclosure signs are dotting the landscape in 2026, here in California and across the nation.
Slightly higher than most states, California saw one in every 1,189 properties — equal to 0.08% — experience a foreclosure sale in the Q1 2026, according to Attom Data.
The number of foreclosures completed in California during Q1 2026 increased 15% from the same time a year earlier.
Nationally, the number of homes receiving a “foreclosure start” (known in California as a Notice of Default or NOD) increased 20% from a year earlier.
Further, the number of foreclosures ending up as real estate owned (REO) properties increased 45% from a year earlier in Q1 2026. Lenders will learn to keep this rate of REO properties at a lower level to avoid the chaotic pilling up of REO inventory experienced in 2008-2009.
Editor’s note — The mortgage holder’s recording of the NOD is the first step in the foreclosure process. The Notice of Trustee’s Sale (NOTS) may be recorded at any time following three months after the NOD is recorded. The entire process from NOD to foreclosure takes around eight months or longer. [See RPI Form 471]
Foreclosure rates have steadily increased since bottoming in 2020, when foreclosures were all but halted due to pandemic-era housing protections. Still, foreclosure rates in 2026 remain at a minor one-eighth of the height experienced during the foreclosure crisis of 2009-2011.
Savvy licensees will continue to earn income as the market continues to shift toward more distressed sales, called non-conventional sales. When traditional sales decline, brokers will learn to tackle foreclosures in the developing non-conventional sales market.
Also, they will offer additional income producing transaction services otherwise provided by MLOs, notaries, short-sale negotiators and even escrow services for clients. BPOs, anyone?
Related article:
The return of the foreclosure (prevention) specialist
Foreclosure prevention specialists garnered a bad name during the last foreclosure crisis. Their playbook involved promising lofty results, requiring upfront fees and often pushing the homeowner even closer to foreclosure by instructing them to stop making mortgage payments.
Real estate licensees need to be prepared with legitimate information and with it the ability to spot scammers who will pop up — and keep a list handy of HUD-approved housing counselors. With information and an eye for troublemakers, agents can respond to clients who reach out for foreclosure prevention assistance.
Related article:
REO specialist
The lender who bids an amount equal to a full credit bid at the trustee’s sale, the sum of all monies owed under the trust deed and note, finds themselves with an unwanted property on their balance sheet. What then?
An individual with experience in handling foreclosed properties representing lenders — an REO specialist — negotiates as the seller broker retained to handle a lender’s portfolio of REO properties. This includes:
- ensuring regular maintenance is performed to keep the properties from falling into a state of blight;
- checking on properties for squatters or vandalism;
- performing broker price opinions (BPOs) for REO property; and
- readying the REO, publishing availability for sale on the MLS and seeing the REO property through to a closed sale.
Related article:
MLO recession survival guide part 3: Working with REO property
While REOs are not yet a prominent feature in the housing market, today’s higher volume of foreclosures will inevitably lead to more REO properties dragging down the balance sheets of lenders and servicers in the future. Mortgage guarantee insurers, private and government, get involved without the management ability to help quickly move the REO property through to a sale.
Buying homes in foreclosure
As foreclosures continue to take up a greater share of the market, homebuyers take an interest in this recessionary type of inventory — and buyer agents need to be prepared.
Buyer brokers in search of the best deals for the buyers they represent will form a working relationship with mortgage lenders, MLOs and servicers. Armed with this insider status, they will hear about REOs with the best investment potential before the lender offers property for sale. For buyer clients, they build a reputation as a dedicated agent, advocating for homebuyers among available REOs.
Beyond the run-of-the-mill end user homebuyers agents usually work with during a “normal” market, property investors also become more common during a foreclosure-burdened market. The price is right.
The various types of investors a buyer broker works with during a recession include:
- equity purchase (EP) investors, who purchase property for long-term ownership from sellers-in-foreclosure, a sale regulated to prevent scams on the seller; [See RPI Form 156]
- local syndicators, preferably licensed, who form and manage real estate acquisitions of any type of property, the purchase price paid using commercial mortgage funds coupled with equity funds raised from investors joining the syndicate, structured as a limited liability company (LLC); and
- speculators or flippers who purchase with short-term, hard money mortgage funds in anticipation of a resale at a profit in a matter of months based solely on the expectation of an upward wave of market momentum.
The real estate broker who negotiates the acquisition of the property and organizes the group is known as the syndicator or manager.
A real estate syndicator works with cautious investors, creating an LLC of cash investors who may otherwise be unwilling to individually purchase property during a recession or early recovery period.
Beyond acquisition, real estate brokers are uniquely positioned to assist with the management of investment property. The broker performs property management services during the group’s ownership of the property, and later handles the resale of the property, structured to provide earnings and eventually profit from a long-term rental property investment.
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