Foreclosure Process

Written by Rachel Arieff
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The foreclosure process involves three basic stages: pre-foreclosure, public auction, and reversion to the lending company. A property can be purchased during any of these phases. The first stage, pre-foreclosure, begins when, due to lack of payments from the owner, the lending company initiates the process of taking the property back from the owner.

During this stage, the foreclosure process may be taken to court. If the judicial process ensues, it can drag out the pre-foreclosure stage by thirty days. However, not all foreclosures go to court. The second stage, auction, occurs after the owner has given up control of the home. The lending institution then puts the property up for auction in the hopes of getting the most money out of it.

How the Foreclosure Process Works

The price at which the property is ultimately sold at auction depends, of course, on who attends and how many. There are stories of dirt-cheap auction purchases; however, it's rarely that easy. If you choose to participate in an auction, make sure you know the rules and protocol. Sometimes the foreclosure attorney running the auction will require bidders to prove their seriousness and present cash deposits first.

The final phase of the foreclosure process is the REO (Real Estate Owned) stage. As the auction stage only happens if the owner isn't able to sell the property during the pre-foreclosure stage, this stage also only comes into play if the property isn't sold at auction. In that case, the property reverts back to the ownership of the lending company. Any interested buyers will then deal directly with the lending company.


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