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What is a Foreclosure?
Foreclosure is the proceeding in which a bank or other secured creditor sells or repossesses a parcel of real property due to thee owner's failure to comply with an agreement between the lender and borrower called a "mortgage" or "deed of trust". Commonly, the violation of the mortgage is a default in payment of a promissory note, secured by a lien on the property. When the process is complete, it is typically said that "the lender has foreclosed its mortgage or lien."

How does the Foreclosure process occur?
The foreclosure process doesn't just happen overnight. A typical foreclosure timeline can extend over several months. Each stage of the foreclosure process offers different types of opportunities for the buyer. The three stages of the Foreclosure process are (1) Pre-Foreclosure (2) Foreclosure Sale/Auction and (3) REO or Real Estate Owned by the Bank.

What is a Pre-Foreclosure?
Pre-foreclosure represents the first stage in the foreclosure process. In this phase, the homeowner has missed at least one payment and is now considered delinquent on the loan. Buying a property in pre-foreclosure involves approaching the owner in default with an opportunity for the owner to escape the burdens of foreclosure.

What is a Foreclosure Sale (Auction)?
The auction is the stage of the foreclosure process after the pre-foreclosure phase of the property has ended. You attend an auction (typically at the steps of the county courthouse) and bid on the home, just like any other auction. During an auction, the lender is now seeking to recapture its losses by auctioning the property in a public sale to the highest bidder.

What is REO Property?
REO stands for Real Estate Owned (by the Bank). REO properties are another great opportunity to purchase foreclosures. The REO stage is the process after the auction, when the lender is either the successful bidder or there are no bids at all. In either case, the bank becomes the legal property owner and the property is considered a "Unprofitable asset" of the bank, which is a fancy way of saying the bank doesn't want to hold on to the property.

What is a HUD Home?
HUD is a shorthand term for the US Government's Department of Housing and Urban Development. When someone with a HUD insured mortgage cannot meet the payments, the lender forecloses on the home; HUD pays the lender what is owed; and HUD takes ownership of the home. Then they sell it as quickly as possible, often at significant savings because most HUD Homes are affordable for low- and moderate-income Americans. HUD Homes are sold "as-is," without warranty. That means that HUD will not pay to correct any problems.

 
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