The Foreclosure Process Defined
Step 1:  Missed Payments - Slippery Slope
Step 2:  Pre-foreclosure (NOD) - Short-Sale and Loan Modification Territory
Step 3:  Auction/Trustee Sale - Buyer Beware
Step 4:  Prelisting - Opportunity Knocks!!!
Step 5:  Listing - Timing Is Everything!
 

The Foreclosure Process Defined:
The foreclosure process gives lenders a way to recover the amount they are owed by a borrower who has defaulted on a loan.  In today's real estate climate this process is often ending with the lender taking ownership of the property that secured the loan and then listing and selling that property to recover their losses.  While the foreclosure process varies from state to state, the description below gives a general overview of how foreclosed properties are handled and where prelisting.com makes its impact.

Step 1:  Missed Payments - Slippery Slope
A lender can't start the foreclosure process if the buyer hasn't defaulted on their loan.  Once the borrower has missed a payment they are in default.  At this stage the lender may chose to give the borrower more time to bring the loan current, offer to modify the loan, or take other action to help bring the loan into good standing.  If the borrower continues to miss payments and is not able make some type of arrangement with the lender to avoid foreclosure the lender can then file a Notice of Default.  This takes us to the next step and the property is now commonly referred to as being in "pre-foreclosure". 

Step 2:  Pre-foreclosure (NOD) - Short-Sale and Loan Modification Territory
Once the lender has filed a Notice of Default (NOD) on the property, the borrower now has a fixed amount of time to bring the loan current.  The amount of time and the specific process varies by state.  Once this time is up, if the borrower hasn't been able to satisfy the lender by doing a short-sale, bringing the loan current, completing a loan modification, or by some other means the lender can file a Notice of Sale (NOS).  This gives public notice that the property will be auctioned in a very short amount of time.  Once the auction date arrives we've reached the next step.

Step 3:  Auction/Trustee Sale - Buyer Beware
When the property is put up for auction the lender always places a starting bid.  Usually this is the amount owed to the bank.  In today's real estate market this starting bid is often much higher than the fair market value of the property since so many borrowers owe more than their home is worth.  On auction day, if no one at the auction offers over the lender's starting bid, the property will then be owned by the lender and may commonly be referred to as a bank-owned property, repo, foreclosed property or REO (an old banker acronym that stands for Real Estate Owned) which all mean substantially the same thing. Buying a property at this auction can be a very risky proposition and is not recommended for anyone but experienced investors.  Once the lender owns the property we move into the next step called prelisting where the opportunity for buyers and investors starts to emerge and with fewer risks. 

Step 4:  Prelisting - Opportunity Knocks!!!
At this stage the property is owned by the lender but the lender is not quite ready to formally list the property for sale with a Realtor.  At the beginning of this stage the lender often knows very little about the property it just acquired. The lender will usually assign the property to a realtor that will act as their eyes on the property.  The Realtor may be asked to have the property secured, asses the condition, coordinate repairs, and help the lender determine a list price for the property.  Depending on the preferences of the lender and the condition of the property this process can take anywhere from a few days to several months.  Prelisting.com is quickly becoming the premier location for banks and their agents to pre-market these properties and allow interested buyers identify themselves to the agents handling these properties. Buyers are now able to qualify themselves and be first in line to submit offers on the property once the bank determines an asking price and lists the property with an agent.   

Step 5:  Listing - Timing Is Everything!
At this stage the lender and agent enter into a listing contract and the lender tells the agent the specific price they want to ask for the property.  The agent will be required to post the property in the local MLS (Multiple Listing System) and market the property.  In almost all cases the lender will not consider offers until the property has made it to this stage and is formally listed with a real estate agent.  Lenders who are motivated to sell these properties are now pricing their foreclosed properties very aggressively from the first day of the listing period and they can sell very quickly.  Many buyers in search of these properties can find themselves out of luck if they don't place a strong, qualified offer on these properties in the first few days of the listing period.  Prelisting.com helps you find properties before they are listed so you can do your homework and be ready to pounce on the right property the moment it comes on the market. 

Step 6:  Sold!
Once the lender accepts a qualified offer on the property it will go into escrow and ultimately have a new owner.  Each time this happens our market gets a little healthier and we are that much closer to a more balanced market and stability!