Pre-foreclosure - This is the stage where the homeowner hits rough financial times. After about three to six months of missed payments, the lender orders a trustee to record a Notice of Default (NOD). At the County Recorder's Office. This puts the borrower on notice that he or she is facing foreclosure and starts a reinstatement period that typically runs several days before the home is auctioned off.

Foreclosure - At auction, an opening bid on the property is set by the foreclosing lender. This opening bid is usually equal to the outstanding loan balance, interest accrued, and any additional fees and attorney fees associated with the Trustee Sale. If there are no bids higher than the opening bid, the property will be purchased by the attorney conducting the sale, for the lender. If this occurs, and the opening bid is not met, the property is deemed a REO or Real Estate Owned. This typically occurs because many of the properties up for sale at foreclosure auctions are worth less than the total amount owed to the bank or lender. When you purchase property at a foreclosure sale, all junior liens other than property taxes are wiped out. Priority of liens is determined by the date of recording.

Post Foreclosure - At this point this is where the lender has taken possession of the property into their “non-income producing assets“ files. And this is where we go after! Banks do not have any emotional ties to these properties and are fairly flexible to making deals - again good deals. Keep in mind that when you purchase a bank REO, you will typically receive the property with a clean title.