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    Foreclosure Glossary

    PRE-FORECLOSURE: This refers to the period after the lender has filed the original complaint and filed a lis pendens on the property indicating the intent to foreclose. At this time the property is still controlled by the seller, but the lender may be involved, too. Lenders do not want to foreclose on property and will often work with the seller and buyer to put together a transaction at this stage. Usually the property is still listed with a local Realtor. And, both the seller and the lender are motivated to avoid an actual foreclosure.

    FORECLOSURE: is the legal process in which a bank or lender sells or repossesses a parcel of real property after the owner has failed to comply with an agreement between the lender and borrower. Commonly, the violation of the mortgage is a default payment of a promissory note, secured by a lien on the property. When the process is complete, the lender can sell the property and keep the proceeds to pay off its mortgage and any legal costs, and it is typically said that "the lender has foreclosed its mortgage or lien".

    COURT-ORDERED AUCTIONS: To complete the foreclosure process, the local clerk of court auctions the property to the highest bidder on the courthouse steps. This foreclosure sale is the final step in the process. Usually, the lender ends up with the property, but others may bid on the property at this time. The highest bidder must close immediately usually the same day with a cash sale with no contingencies.

    BANK OWNED PROPERTIES (REO): Another name for bank owned properties is REO, an acronym for "real estate owned." This refers to property that has come into the possession of a bank or lender, usually through the foreclosure process. Most lenders and banks are not in the business of managing and holding real estate and want to move the property as quickly as possible. Many banks turn their REO properties over to large asset management companies for disposition. Usually these properties are then listed with Realtors.

    GOVERNMENT OWNED: "HUD homes" is a term often heard in connection with government-foreclosed homes. Actually, this is a misnomer, as all these homes started out as homes that had loans backed by the Federal Housing Administration (FHA). When an FHA-insured loan goes into default, the home then falls under the jurisdiction of HUD, which has the responsibility of disposing of it. The originating lender is paid off by FHA, and the home goes back to the government as its owner, rather than going through normal foreclosure procedures. It is then administered by HUD for sale.