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.