Foreclosure Process
Foreclosure Homes
Foreclosure homes are the result of a homeowner who is unable to make their mortgage payments over a length of time. Eventually, the homeowner falls behind in payments and their mortgage goes into default. The lender, who provided the mortgage to the homeowner, typically chooses to foreclose the home to pay off the debt incurred by the homeowner. Proper paperwork is filed and complaints are made. Often times the lender chooses to auction off the home. The foreclosure home is sold to the highest bidder, usually at the local courthouse steps, giving the lender an opportunity to make back as much money as possible on the foreclosed property.
REO Foreclosures
REO foreclosures are real estate owned properties that have been sent to foreclosure. When a property is listed as an REO foreclosure, the homeowner has defaulted on their mortgage. In this particular case, the property is taken back by the mortgage lender, usually a bank. Properties typically go into REO foreclosure when a buyer for the foreclosed home can not be found during a foreclosure sale at the court house steps. In this instance, the mortgager repossesses the property and turns around and sells it on its own. The bank will contact a local real estate professional to list the property for sale to the general public through the local multiple listing service.
Bank Foreclosures
Bank foreclosures are the result of a homeowner defaulting on a loan or mortgage they have received through a bank. When the homeowner can no longer make payments on their mortgage or follow the terms specified in the mortgage, the bank takes possession of the property, witch become a bank owned property. Once the bank owns the property they send it into foreclosure as a means to make back some or all of the money lent to the homeowner. Bank foreclosures, or bank owned homes, are sold at better rates then non foreclosed homes. The bank uses the proceeds to pay off the mortgage and any legal fees.
Repo Homes
Repo homes are sometimes referred to as REO foreclosures. When a homeowner defaults on their mortgage, the lender has the option to take the property into repossession. Most repo homes are sold at auction at cheaper rates then other homes. They are also oftentimes "bundled" with other homes and sold as a package to an investor. The repo home is sold to the person who has placed the highest bid. Repo homes are typically sold for less to allow the lender to make back as much money as they possibly can in a short amount of time. It is recommended that all potential buyers of repo homes have the property thoroughly inspected before purchasing the home.
Pre-Foreclosure or Short Sale
There is a period of time between when the mortgager goes into default and when the home is in foreclosure. This period of time is referred to as the pre-foreclosure period. During this period the homeowner can pay off the amount their mortgage is in default for during what is known as a grace period or they can sell the property in question to a third party and pay off the amount in default. Defaulted mortgages that are not paid off during the pre-foreclosure period are either sold at auction or taken into possession by the lender or lien holder.
Foreclosure Home Auctions
Foreclosure home auctions occur when the homeowner is in default
and is unable to pay the amount in default by the end of the
pre-foreclosure period. Once the home is no longer in possession by the
owner the home is listed and sold at auction. The potential buyer who
places the highest bid on the foreclosed home wins the auction.
Foreclosure home auctions usually sell at cheaper rates then other
foreclosed properties. Buyers are usually required to 
pay the winning
bid in cash. Auctions eliminate dealings between the homeowner in
default and any potential buyers.
