Is it ethical to buy a foreclosed home?

A foreclosed home can be a bargain, but is it right to profit from someone else's misfortune?

Paul Sakuma/AP/File
This foreclosed home in East Palo Alto, Calif. was for sale a month ago. Is it ethical to buy a foreclosed home?

I was having a discussion with Linda the other day about buying foreclosures and doing it the “right” way. The reason we were chatting about it was because during Financial Peace University I remember Dave talking about how he went and visited homeowners who were about to be foreclosed upon and offered them $10K more than the starting price at the auction.

For example, one homeowner he visited was going to be foreclosed upon 3 days later – the bank was going to be auctioning the property with a starting price of $150K. The homeowners house was appraised at something like $250-$300K – and they were asking a price in that ballpark. But Dave was aware they had 3 days to sell the house or they would be foreclosed upon.

The question I keep asking myself is – is it right?

Morally, it feels a lot different buying a bank-owned property that was foreclosed upon – because the damage is done. The homeowner already lost the house – and getting a deal from a bank (if you can) seems justified.

On one hand you could argue that any options offered to someone about to lose their house is a gesture of kindness – because after all, they can turn down the offer.

But it seems to me that there is a very fine line between using someone’s misfortune for gain and just offering what it’s worth to you at that given moment.

Anyway, my hunch is that every situation is a little different, so there may not be a black & white answer. But either way, what do you think?

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