Types of Foreclosure Properties

There tend to be three stages in foreclosure process. These periods are know as preforeclosures, auctions, and REOs. Preforeclosures are still owned by the borrowers who are in default on one or more mortgage loan payments. This occurs when the lender initiates a foreclosure proceeding as the result of the delinquent loan payments. If the borrower cannot cure the default by paying the arrears, and does not sell the property, it is sold at a public foreclosure auction.

Auction properties have been posted for public sale and may be bought at the time of the foreclosure auction by arranging to pay the arrears plus other costs at the same time the lender legally takes ownership of the collateral. If no one buys the property at the auction, it becomes what is known as �real estate owned�, in which case the lender is now the seller.

REO is the term for "real estate owned" by the bank, savings and loan, or other lending entity after the foreclosure sale is concluded with no other purchaser buying the real estate.

Some properties have a fourth stage in the foreclosure process. Loans that are insured by federal agencies such as Fannie Mae, the Department of Veterans Affairs (VA), or HUD, are eventually acquired by the government. These agencies will reimburse for the loan amount and any other cost that were associated with the foreclosure. When the government becomes the rightful owner, arrangements are made to sell the real estate to the public through a realtor or contractor.

The delinquent property can be bought in any one of the stages in the foreclosure process. Understanding each period in a foreclosure will allow you to buy the right property at the right time, ultimately helping others solve their financial problem as well as purchasing an affordable home or profitable investment.