FAQ

A foreclosure is a legal process in which a bank, mortgage company or other secured creditor sells or repossesses a home or other type of real estate property due to non-payment of a mortgage or from a specific default of a mortgage note. In most cases with residential real estate being homes in specific, an owner is behind on the mortgage and the bank or lender repossesses the home.

REO stands for "Real Estate Owned" and is commonly used by banks to identify there properties that they have taken back and that they have in inventory as foreclosure homes (properties). You will also hear REO Foreclosures as an extension of the terminology to describe a foreclosed home owned by a bank or lender.  At NoForeclosure in our "Foreclosure Search" section, we reference the term "Bank Owned" to indentify the REO properties.

A Pre-Foreclosure is a home (property) that has been posted by a bank or lending institution at the court house to publicly notify all parties that per the deed that the owner signed they are planning on re-possessing their property if they do not cure the default requirement (in most cases make up the back payments owed to the bank).  These properties are auctioned at the court house steps once per month, depending on the state will determine the day of the auction.  Many states hold their auction on the first Tuesday of every month.  For a buyer to purchase one of these properteis, they will need to be able to pay cash or provide a cashiers check to the Trustee that is holding the auction for the lending institution re-possessing the property.  A pre-foreclosure property once re-possessed, can take any where on the average from 60 to 180 days to hit the market as an active home for re-sale.

Most buyers that are wanting to buy a foreclosure, prefer to purchase a property once it has been re-possessed and placed on the market.  NoForeclosure.com offers three types of foreclosure properties: Bank Owned, HUD Homes and Cash Only Foreclosures.  All of these properteis have already been re-possessed by a lending institution, and ready for a buyer to view the properties and be able to close on the home. 

A short sale is when a homeowner owes to a bank or lending institution more than the value of the home and the bank agrees to sell the property for less than is owed. For example, if your outstanding mortgage balance is $250,000 but your home is only worth $200,000 then you are upside-down and may be able to do a short sale so you can sell the property and the bank can be paid off. If the banks payoff is less and they accept the lower balance this constitutes a short sale.

This is important, and approved short sale is when the owner has made a formal application to the bank providing the bank with a letter to the bank (hardship letter) explaining why they cannot make the payments along with supporting financial information so the bank can approve the borrower/owner for a short sale. This is step one in the approval process, step two is that the bank will also need to approve the value of the property to determine what the actual selling price of the property can be sold for. When purchasing it is important to know what stage of the approval that the home is in. To obtain a approval for the owner and for the home value this can take from a month to several months. Many buyers have waited for three to six months for a property to be approved. The knowledge of your agent representing you is important in this process.

If a property is advertised and or marketed as a short sale it can also be a pre-foreclosure.  Many properties that are short sales have not been posted by the bank or lender for an upcoming foreclosure. The seller could just be upside down on the mortgage and not be able to continue to make payments, so in this instance as an example they would start the short sale process before they are behind on payments.  In todays market many of the homes that are posted for foreclosure as a pre-foreclosure do not go to auction, because of the lenders offering more short sale extensions and loan modification workouts.

1. Pre-foreclosure: A Pre-foreclosure begins when a borrower becomes delinquent and can no longer make payments. It is the period of time between when a lender publicly files-posts a foreclosure notice of default or lis pendens and ends at a sheriff or trustee auction sale. During this period of time the property owner will have a chance to a partial or full payment to the lender or sell the property and pay it off. If the property is sold during this stage the owner can avoid having a defaulted loan on their credit history. Just because a property is posted for foreclosure does not mean that the lender will take it back, the lender will in many instances work with the buyer to extend the foreclosure.
2. Foreclosure Auction Sale: A Foreclosure auction takes place takes place at a public auction after the pre-foreclosure process has ended. Foreclosed properties are sold at public auction to the highest bidder. Depending on Foreclosure law auction sales are generally held at the county courthouse or a trustee’s office. The opening bid at an auction sale is based on the total amount owed to the foreclosing lender, interest incurred, late charges, penalties, outstanding liens, and fees incurred because of the foreclosure proceedings. In most states properties purchased at auction generally have to be paid with cash or a cashiers check on the day of the auction. In some states bidders are required to bring a percentage of the bid amount to the auction and can pay the balance at an agreed to future date. In other states you could be required to pay the entire balance of the agreed to price the same day of the auction with certified funds. The auction sale is the most difficult way to purchase property. Buyers should also check the title for liens that can be attached to the property. There have been many buyers purchase property at auctions only to find out that there is an attached lien that can cost the buyer thousands of dollars to settle prior to re-selling the property.
3. REO Real Estate Owned: A REO is the terminology used by lenders for property that they have taken back by repossession and is now a foreclosed property owned by the lender. If the property sells on the auction then the property is transferred to the new buyer from the lender. When the property is taken back by the lender it is placed for sale sometimes from the banks own sales department in charge of selling there REO or in most case from a network of real estate agents who help the lender dispose of the properties through MLS, Auctions, or other means of distribution. This is the easiest type of foreclosure to purchase if you find a knowledgeable real estate agent to represent you as a buyer’s agent.