Pre-Foreclosure (Notice of Default or Lis Pendens)
Pre-foreclosure is the first stage of the foreclosure process in which a homeowner
has defaulted on his or her mortgage payments, but still has the opportunity to stop
the foreclosure by catching up on defaulted payments or paying off the entire loan balance —
usually by refinancing or selling the property. Homeowners in pre-foreclosure are often motivated
sellers who want to avoid losing their property at public auction.
Auction (Notice of Trustee’s Sale or Notice of Foreclosure Sale)
A public foreclosure auction occurs if a homeowner in default does not stop foreclosure
proceedings during the pre-foreclosure period. Properties are typically auctioned off
in a public location, such as the local county courthouse, by an attorney or local public
official. Auctions can be great opportunities to buy property below market value, but usually
don’t allow for property inspections and often require a lot of cash depending on the auction
process in your area.
Bank-Owned (REO)
A property becomes a full-fledged foreclosure when it is repossessed by the foreclosing
lender, who can take possession either through what’s called a died-in-lieu-of-foreclosure
agreement with the owner during the pre-foreclosure period or through a winning bid at the
public auction. Foreclosing lenders are often motivated to sell bank-owned properties (also known as REOs)
quickly because they are non-performing assets.
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