How does a foreclosure deal work?

[Laramie Hiebner]

How does foreclosure work?

[Ned Carey]

@Laramie Hiebner Foreclosure is kind of a generic term. 

There is pre- foreclosure, this generally means when a homeowner is in default on their mortgage or that a mortgage  foreclosure has been started. 

The lender does not technically take the property back. It goes to a foreclosure auction. Generally the bank will bid at the auction the amount owed. If the amount owned is greater than the value of the house, the bank usually winds up buying the property at the auction.

If that amount owned is substantially less than the value of the house then usually an investor will buy it at the auction.

If the bank buys the property at the auction it then becomes what is know as an REO (for Real Estate Owned). The bank will then topically list the prperty with an agent and you can buy it from the bank. You are not likely to ever get a ban to sell to you directly, they list their properties with agents.

So you can see there are at least three different ways you could buy a "Foreclosure"