How to Understand the Different Types of Foreclosure Properties

It is certainly a shame, the trend toward increasing numbers of foreclosures now that the real estate market is tightening and interest rates are starting to reset. It can be kind of confusing to figure out some of the different terms being thrown around when people talk about the foreclosure crisis, however. If you'd like to understand more about the different types and stages of foreclosure, here are a few definitions.

Instructions

Difficulty: Moderate

Things You’ll Need:

• An interest in the real estate market

1. Learn the Latin term "Lis pendens". This refers to a type of preforeclosure property, one on which a notice of foreclosure has been filed in a state that follows the judicial foreclosure process. In such a process, the defaulting homeowner will get to have his/her say in court as regards the reason for the default, and this court hearing may or may not affect the outcome of the foreclosure.
2. Know that a Notice of Default (NOD) is filed on a preforeclosure property in a Deed of Trust state. These states follow a nonjudicial foreclosure process, so the property will proceed directly to auction without intervention from the court system. It is possible for a buyer to purchase a prefreclosure property directly from the homeowner before it comes up for auction, which may be of benefit to both parties as long as the potential buyer is not trying to take advantage of the homeowner at this difficult time.
3. Understand that foreclosure properties have already been foreclosed on and are now being sold at auction. Potential buyers will be competing with other bidders for these properties and in many cases such homes sell for no less than 5% below market value.
4. Recognize the term REO, short for Real Estate Owned. These are properties that failed to sell at auction so ownership reverted to the lender. These homes are among the easiest types of foreclosure to purchase and come vacant, with clear title, and with no back taxes owing.