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Navigating Foreclosure Home Purchases in Tennessee: A Beginner’s Guide

  • Writer: Jeremiah McGuire
    Jeremiah McGuire
  • Jan 27
  • 4 min read

Buying a home through foreclosure can be a pathway to home ownership or real estate investment at a potentially discounted price, but it can be complicated so being educated on the process is important. In Tennessee, the foreclosure process has specific rules, and purchasing such a property requires careful planning. If you’re considering this route, here’s a detailed, step-by-step guide with tips to help you proceed wisely.



Understanding Tennessee Foreclosure Basics


First, know that Tennessee is a non-judicial foreclosure state in most cases. This means lenders can foreclose without going through the court system, provided the mortgage includes a “power of sale” clause. The process moves relatively quickly—often about 60 days from notice to sale. Foreclosed properties are typically sold at a public auction, and if they don’t sell there, they become Real Estate Owned (REO) properties owned by the bank.


How to Purchase a Property in Foreclosure in Tennessee


1. Get Your Finances in Order

  • Foreclosure auctions require the purchaser to provide proof of funds at the auction and usually to be able to deposit those funds with the foreclosure attorney's office within 24 - 48 hours of winning the auction. Don't try to bid on a foreclosure property without having proof, you may not be allowed to come and bid again in the future.

  • If you’re looking at REO properties, properties that have already been sold at foreclosure and are now owned by the bank, financing is possible, but having proof of funds or pre-approval makes you a stronger buyer.

  • Start saving for substantial additional costs like repairs, title insurance, and upkeep after taking ownership of the property.


2. Research Properties and Locations

  • Find foreclosure listings through:

  • Drive by properties you’re interested in. Exterior inspections are usually all you can do pre-auction, but they help you gauge the neighborhood and visible condition.


3. Understand the Auction Process

  • Auctions are held at the county courthouse or a designated public location.

  • Registration: You’ll need to register beforehand. Companies like Auction.com actually require providing proof of funds prior to approval to bid.

  • Bidding: Auctions move fast. Set a max bid and stick to it, it is easy to get caught in the heat of the moment.

  • Depending on how the auction is structured, the winning bidder may be required to pay immediately or in person within 24-48 hours. They will then a Trustee’s Deed or Sheriff’s Deed and in most cases are responsible for ensuring the Deed is recorded themself.

  • You buy the property “as-is,” often without a chance to inspect the interior. Liens (like unpaid taxes or HOA fees) may survive the sale, so title research is essential.


4. Perform Due Diligence (Before Auction)

  • Title Search: Hire a title company or real estate attorney to check for liens. In Tennessee, some liens can remain attached to the property.

  • Property Value: Determine the property’s market value (post-repair) so you know what it’s worth.

  • Auction Rules: Each county may have slight variations. Call the county Trustee’s office to clarify procedures.


5. Consider Buying an REO Property

  • If the property doesn’t sell at auction, the bank takes ownership and lists it for sale, often through a real estate agent.

  • Pros: You can inspect the property, secure financing, and negotiate. The bank usually clears some liens or require that the sales price be sufficient to pay those liens at closing.

  • Cons: Prices may be higher, and banks sell “as-is” (though they may sometimes offer limited disclosures).


6. Work with Professionals

  • Real Estate Attorney: Essential in Tennessee to navigate liens, deed issues, and contracts. Worth every penny.

  • Real Estate Agent: Particularly useful for REO purchases. Find one experienced in foreclosures.

  • Inspector: For REOs or post-auction, get a full inspection before closing.


7. Close the Purchase

  • Auction: Closing is immediate upon payment.

  • REO: Similar to a traditional sale, with a closing period where you finalize financing, complete inspections, and sign paperwork. The bank may prepare a special warranty deed.


Helpful Tips for First-Timers

  1. Start Small: Consider attending a few auctions as an observer to understand the flow before bidding.

  2. Budget for Repairs: Foreclosures often need significant repairs. Get contractor estimates if possible, and set aside at least 10–20% of the purchase price for renovations.

  3. Beware of Occupied Properties: After an auction, you might need to evict occupants—a legal process that takes time and money.

  4. Check for Redemption Periods: Tennessee does not have a statutory right of redemption for non-judicial foreclosures, but for judicial foreclosures, there can be a short period. Confirm with your attorney.

  5. Patience is Key: The foreclosure buying process can be lengthy and competitive. Don’t rush into a bad deal.


Potential Pitfalls to Avoid

  • Not researching liens: You could inherit back taxes or other debts.

  • Overbidding: It’s easy to overpay, especially when emotions run high.

  • Skipping inspections on REOs: Even though it’s “as-is,” an inspection informs your offer and repair planning.

  • Assuming the home is empty: You may face the emotional and legal challenges of evicting a former owner or tenants.


Final Thoughts

Buying a foreclosure in Tennessee can offer great value, but it comes with complexity and risk. For beginners, starting with an REO purchase through a real estate agent may be a more manageable entry point. Whichever path you choose, arm yourself with knowledge, professional help, and cautious optimism.


Disclaimer: This guide is for informational purposes and is not legal or financial advice.


I hope that you found this informative. If you feel that this information may help you or a client, please reach out. It is my mission to help others.


Jeremiah L. McGuire



Attorney

Memphis, TN

901-494-1622

Your Past. Your Future. Our Priority.

 
 
 
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