The Foreclosure Pipeline is Real: Q3 2025 Market Intelligence for Your Business
The foreclosure market is expanding with a 33% increase in REO activity. Learn how to position your business for growth and capture local opportunities in Q3 2025.
TABLE OF CONTENTS
101,513 Filings. 33% REO Growth. Here's What You Need to Know
Key Takeaways
The foreclosure market is shifting, and if you're working in defaults, you need to understand what's coming. Q3 2025 brought real growth in foreclosure activity, and the inventory pipeline is picking up steam. This report breaks down what the data means for your business and how to position yourself to capture opportunities in your local market.
The Numbers That Matter:
- 101,513 total foreclosure filings in Q3 2025 (up 17% year over year)
- 72,317 new foreclosure starts in the quarter (up 16% year over year)
- 11,723 bank repossessions completed (up 33% year over year)
- 35,602 filings in September alone (up 20% year over year)
- National average of 1 in 1,402 housing units in foreclosure
- Average time to complete a foreclosure: 608 days (down 6% from Q2, down 25% from last year)
This isn't a crisis, but it's real growth. And growth creates opportunity.
What's Driving the Market Right Now
The REO Surge: Where It's Coming From
The biggest story in Q3 is the 33% jump in REO completions year over year. That's substantial, and you need to understand why it's happening.
A major factor: VA loan foreclosures hit a two-year high. A foreclosure moratorium on VA loans expired in 2024, and the pipeline is now clearing into the market. VA borrowers often have thinner financial cushions than conventional borrowers, so expect continued pressure in this segment.
FHA loans are also seeing steady increases in distress. These are borrowers who need help, and they're a growing portion of the foreclosure pipeline.
Banks are also actively moving inventory through their systems. Post-pandemic, servicers and lenders are normalizing their operations and getting serious about clearing distressed assets from their books.
What This Means for Your Pipeline
More foreclosure activity means more opportunities. Distressed sellers need representation. Investors need deal flow. Banks need efficient disposition partners. Your community isn't just watching this happen from the sidelines. You're participating in it.
The question is: are you organized and informed enough to capture your share?
How Banks Will Move This Inventory
Banks aren't dumping foreclosed properties all at once. They're managing this strategically, and understanding their playbook is critical to your strategy.
The Multi-Channel Approach
Staggered Releases
Banks will release inventory gradually to avoid destabilizing prices in your local market. You'll see a steady flow rather than a massive dump. This actually favors informed, responsive agents who can move quickly on good opportunities as they come.
Banks will release inventory gradually to avoid destabilizing prices in your local market. You'll see a steady flow rather than a massive dump. This actually favors informed, responsive agents who can move quickly on good opportunities as they come.
Bulk Sales to Investors
A significant portion of REO inventory will move directly to institutional investors and large buyer groups in package deals. This bypasses traditional MLS listings entirely. If you're not connected to these channels, you're missing deals that your competitors might not even know exist.
A significant portion of REO inventory will move directly to institutional investors and large buyer groups in package deals. This bypasses traditional MLS listings entirely. If you're not connected to these channels, you're missing deals that your competitors might not even know exist.
Auction-First Strategy
Online and in-person auctions are increasingly where foreclosed properties go first. Vacant properties move through auctions especially fast. If you're not monitoring auction platforms and courthouse steps in your area, you're missing velocity.
Online and in-person auctions are increasingly where foreclosed properties go first. Vacant properties move through auctions especially fast. If you're not monitoring auction platforms and courthouse steps in your area, you're missing velocity.
Rental and Stabilization Programs
Government initiatives are steering some foreclosed properties toward rental conversions and stabilization programs. Banks participate because it reduces their carrying costs. This isn't a huge portion of inventory yet, but it's growing.
Government initiatives are steering some foreclosed properties toward rental conversions and stabilization programs. Banks participate because it reduces their carrying costs. This isn't a huge portion of inventory yet, but it's growing.
Property Condition Matters
Vacant properties clear much faster than occupied ones. Banks triage accordingly. They move fast in areas where holding costs are highest. In your market, this means understanding which properties are moving through which channels.
Vacant properties clear much faster than occupied ones. Banks triage accordingly. They move fast in areas where holding costs are highest. In your market, this means understanding which properties are moving through which channels.
What Smart Agents Do With This Information
If you know that a significant portion of inventory is moving through bulk sales and auctions, you organize your business around those channels. You build relationships with bank REO departments now, before the rush. You monitor auctions as a primary source of deal flow, not an afterthought. You position yourself as someone who can move fast, not someone waiting for MLS listings to drop.
The agents who thrive in this environment aren't waiting for the market to come to them. They're going after it.
Your Local Market: Understanding What's Unique About Your Area
The national numbers are interesting context, but what matters is what's happening in your backyard.
Some states and metros are experiencing significantly higher foreclosure rates than others. The national average is 1 in 1,402 housing units in foreclosure. But in some areas, the ratio is dramatically different.
High-Distress Areas:
- Florida metros (Lakeland, Cape Coral, Ocala)
- Columbia, South Carolina
- Cleveland, Ohio
- Parts of Texas, California, Illinois, and New York
What This Means:
If you're operating in one of these high-distress areas, your pipeline is going to be different from agents in lower-distress regions. You have more foreclosure volume, more REO opportunity, more competitive pressure, and more potential clients in distress.
If you're operating in one of these high-distress areas, your pipeline is going to be different from agents in lower-distress regions. You have more foreclosure volume, more REO opportunity, more competitive pressure, and more potential clients in distress.
The Critical Question for You:
What does your local market look like? Do you know your local foreclosure rate? Do you know which neighborhoods have the highest concentration of distressed activity? Do you know whether your market is experiencing faster or slower growth than the national average?
What does your local market look like? Do you know your local foreclosure rate? Do you know which neighborhoods have the highest concentration of distressed activity? Do you know whether your market is experiencing faster or slower growth than the national average?
If the answer to any of these is "not really," that's your first priority. Get your local data. Understand where the opportunity is concentrated in your area. A one-in-1,402 national average might hide a one-in-600 reality in your specific market.
What This Means for Different Roles in Your Community
For Agents
You operate in a specific market. That market has unique dynamics. Your job is to own those dynamics.
Step One: Know Your Numbers
Pull your local foreclosure data for the past 12 months. How many foreclosure starts happened in your market? How many REO completions? What's your local foreclosure rate compared to the national average? What neighborhoods are seeing the highest concentration of activity? This isn't optional. It's the foundation of your strategy.
Pull your local foreclosure data for the past 12 months. How many foreclosure starts happened in your market? How many REO completions? What's your local foreclosure rate compared to the national average? What neighborhoods are seeing the highest concentration of activity? This isn't optional. It's the foundation of your strategy.
Step Two: Understand Your Channels
Foreclosures don't all flow through MLS. Figure out where they flow in your market. Are court-supervised auctions a major channel in your state? Are online auction platforms active? Do local banks have established REO departments? Where are bulk deals happening? Map this out. Get involved in the channels where inventory actually moves.
Foreclosures don't all flow through MLS. Figure out where they flow in your market. Are court-supervised auctions a major channel in your state? Are online auction platforms active? Do local banks have established REO departments? Where are bulk deals happening? Map this out. Get involved in the channels where inventory actually moves.
Step Three: Build Your Database
You need a system to track distressed properties in your area. Which homeowners are falling behind? Which properties are pre-foreclosure? Which are in active foreclosure? Which are moving to auction? You need this intelligence, and you need to update it constantly. This isn't about being aggressive. It's about being helpful when people need help.
You need a system to track distressed properties in your area. Which homeowners are falling behind? Which properties are pre-foreclosure? Which are in active foreclosure? Which are moving to auction? You need this intelligence, and you need to update it constantly. This isn't about being aggressive. It's about being helpful when people need help.
Step Four: Specialize Your Service
Don't try to be everything to everyone. You might specialize in representing distressed homeowners who want to avoid foreclosure. You might focus on representing investors at auctions. You might build relationships with banks and servicers to become their local REO disposition expert. You might do all three. But be intentional. Know who you serve and get really good at serving them.
Don't try to be everything to everyone. You might specialize in representing distressed homeowners who want to avoid foreclosure. You might focus on representing investors at auctions. You might build relationships with banks and servicers to become their local REO disposition expert. You might do all three. But be intentional. Know who you serve and get really good at serving them.
Step Five: Build Relationships That Matter
If bulk sales are happening in your market, know who's buying them. If auctions are a major channel, know the auction companies and the regular bidders. If local banks have REO departments, know the people in those departments. If there are foreclosure attorneys in your market, know them. The deals flow through relationships. Build them now.
If bulk sales are happening in your market, know who's buying them. If auctions are a major channel, know the auction companies and the regular bidders. If local banks have REO departments, know the people in those departments. If there are foreclosure attorneys in your market, know them. The deals flow through relationships. Build them now.
For Investors
The pipeline is growing. The question for you is whether you're positioned to access it.
Understand Your Local Opportunity
Growth isn't uniform. Some areas are seeing 20% increases in foreclosure activity. Others are seeing 50% increases. Understanding your local market matters. Are opportunities expanding in your area or contracting? Is the market moving toward or away from distressed activity?
Growth isn't uniform. Some areas are seeing 20% increases in foreclosure activity. Others are seeing 50% increases. Understanding your local market matters. Are opportunities expanding in your area or contracting? Is the market moving toward or away from distressed activity?
Build Multiple Entry Points
REO inventory is moving through multiple channels: auctions, bulk sales, direct bank relationships, traditional MLS. You need access to multiple channels. One channel can dry up or become competitive. Multiple channels give you flexibility and consistent deal flow.
REO inventory is moving through multiple channels: auctions, bulk sales, direct bank relationships, traditional MLS. You need access to multiple channels. One channel can dry up or become competitive. Multiple channels give you flexibility and consistent deal flow.
Get Serious About Auctions
If auction volume is increasing in your market (and it is nationally), you need to understand how your local auction system works. Online platforms, courthouse steps, lender-hosted auctions. Learn the mechanics. Build a system to evaluate and bid efficiently. Auctions offer speed and opportunity, but only if you're organized.
If auction volume is increasing in your market (and it is nationally), you need to understand how your local auction system works. Online platforms, courthouse steps, lender-hosted auctions. Learn the mechanics. Build a system to evaluate and bid efficiently. Auctions offer speed and opportunity, but only if you're organized.
Develop Bank Relationships
Bulk sales and direct bank inventory access require relationships. Start building them now. A call to your local bank's REO department isn't aggressive. It's professional. You're offering to help them move inventory efficiently. That's valuable to them.
Bulk sales and direct bank inventory access require relationships. Start building them now. A call to your local bank's REO department isn't aggressive. It's professional. You're offering to help them move inventory efficiently. That's valuable to them.
Know Your Numbers
What's the average time on market for distressed properties in your area? What's the average discount off market value? What neighborhoods have the highest REO concentration? What's your local foreclosure rate trend? This data should inform every decision you make.
What's the average time on market for distressed properties in your area? What's the average discount off market value? What neighborhoods have the highest REO concentration? What's your local foreclosure rate trend? This data should inform every decision you make.
For Lenders and Servicers in Your Community
The foreclosure and REO landscape is evolving, and how you adapt will determine your competitive position.
More foreclosure activity means your teams are handling more volume. Your operational efficiency becomes a bigger deal. Servicers and lenders who can process, coordinate, and disposition inventory quickly will outperform those with manual, paper-based workflows.
You'll also see increasing pressure to participate in rental and stabilization programs. Banks value servicers who understand these pathways and can facilitate them. If you're not already exploring how rental conversions or government incentive programs work in your market, start now.
The multi-channel disposition strategy we outlined means you need flexibility in your operations. Properties might go to auction, bulk sale, traditional sale, or stabilization program. Your workflows need to handle that diversity without breaking down.
Finally, occupied versus vacant distinction matters operationally. Occupied REO properties require different handling than vacant ones. Your team needs clear protocols for both.
What You Should Be Tracking
To stay ahead of this market, you need to monitor a few key indicators in your area:
Foreclosure Volume Trends
Are starts and completions accelerating, holding steady, or slowing in your market? This tells you whether opportunity is expanding or contracting. Track it monthly.
Are starts and completions accelerating, holding steady, or slowing in your market? This tells you whether opportunity is expanding or contracting. Track it monthly.
Average Time on Market
For distressed properties in your area, how long are they sitting before sale? Is that time shrinking (more competitive, faster market) or expanding (more inventory, slower absorption)? Changes here signal market shifts.
For distressed properties in your area, how long are they sitting before sale? Is that time shrinking (more competitive, faster market) or expanding (more inventory, slower absorption)? Changes here signal market shifts.
Auction Volume and Clearing Rates
If auctions are active in your market, track how many properties are going to auction and what percentage are actually selling. If clearing rates drop, inventory is backing up. That's a warning sign.
If auctions are active in your market, track how many properties are going to auction and what percentage are actually selling. If clearing rates drop, inventory is backing up. That's a warning sign.
Occupancy Status
Are most distressed properties in your area occupied or vacant? This changes your strategy significantly. Occupied properties require different handling and move slower.
Are most distressed properties in your area occupied or vacant? This changes your strategy significantly. Occupied properties require different handling and move slower.
Buyer Demand
Are investors actively bidding at auctions? Are banks getting competitive offers on bulk sales? Weak buyer demand would signal that absorption is slowing. Track it.
Are investors actively bidding at auctions? Are banks getting competitive offers on bulk sales? Weak buyer demand would signal that absorption is slowing. Track it.
The Bottom Line for Your Business
The foreclosure market is expanding. Inventory is increasing. Banks are getting organized about disposition. Opportunity exists for agents, investors, and service providers who understand the landscape and position themselves strategically.
But opportunity without strategy is just noise.
You need to:
Know your local market deeply. Not the national average. Your specific area. Your specific numbers. Your specific opportunities.
Understand where inventory flows in your market. Not all of it goes through MLS. Figure out the channels and get involved in the ones that matter.
Build relationships that matter. With banks, with investors, with auctioneers, with other professionals. The deals flow through relationships.
Be responsive. Banks and investors aren't going to wait for slow agents. When opportunities appear, they go to people who are ready to move.
Pick your lane. Decide who you serve and what you specialize in. Master it. Don't try to do everything.
This isn't complicated, but it requires focus. The agents, investors, and service providers who succeed over the next 18 months won't be the ones who get lucky. They'll be the ones who understood their market, built the right relationships, and stayed organized.
That can be you. The data is there. The opportunity is there. The question is whether you're going to organize yourself to capture it.
References & Data Sources
- ATTOM Q3 2025 U.S. Foreclosure Activity Report
- ATTOM August 2025 Foreclosure Market Report
- MortgagePoint: Forecasting Foreclosure Volume in 2025
- Auction.com Market Dispatch Q2 2025
- HousingWire and industry forecaster analysis
Last Updated: October 2025This report is designed for our KW Default Solutions Community to understand local market dynamics and plan your business accordingly.
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