What is foreclosure

Question

When a house is listed as "foreclosure" on MLS, what exactly does it mean?  The other categories include "short sale", "pre-foreclosure", and "REO", so they are not referring to the same type of listings. And almost 80% of the "foreclosure" listings I look at ended up being expired!

According to my understanding, "foreclosure" is sheriff sale. However, sheriff sale will never be listed on MLS by a agent, because no agent (but attorny) is hired for handling sheriff sale.

So what is "foreclosure" on MLS referring to?

Mark Updegraff · Answer

I agree with Mitch, most people don't understand how foreclosure works.  It seems like the MLS is very buzz word centric.  I would imagine the categories are the same.  My guess would be that foreclosure would just be a catch all for an agent that doesn't exactly know where it is in the process, or a buzz word to describe the condition (most foreclosures are thought to need work etc)

Mitch Kronowit · Answer

Good question. I think the terms are throw around a lot without much regard to their meaning. Short sales are a type of pre-foreclosure and REO's are basically a post-foreclosure product. I only believe 75% of what's in a listing and ask the agent to fill in the voids.

Looking forward to reading other perspectives.

Bill Gulley · Answer

Interesting observation, I think agents use the term as a marketing ploy simply toget your attention. First I would think they mean that the property is bank owned, but it could mean the owner is facing foreclosure.

As I have mentioned before, terminology in RE is important, IMO. What we call things is important to communicate....

A pre-foreclosure should mean a borrower has been given a formal notice of demand that the mortgage is being accelerated to maturity arising out of some event of default.

Might as well throw in "slow pay" meaning a loan that has had a poor payment history and is likely to be called due or accelerated to maturity due to some event of default.

Slow pays usually are canidates for short sales, with pre-foreclosures. The borrower/owner is the seller and the bank agrees to accept less than is owing for the conditional release of the lien. I have purchased many properties in this category but not under current short sale requirements, and I understand that banks seem to think they own the property while making demands for the sale, but all they really have a right to say is if they will accept a certain amount for the release of the lien.

Loan Servicers may not be the note holder, but could be, but generally are simply under contract with the note holder to provide adminstrative oversight and collection activities of a loan. Usually, the servicer is given the power of sale and appoints a new trustee under the deedof trust or mortgage to conduct the foreclosure sale. They are paid servicing fees for the functions performed, like coordinating a foreclosure sale, so they are often inclined to head to a sale because of fees they will be paid as opposed to assisting in work outs or modifying the note.

A foreclosure should be describing a property that has been sold at foreclosure sale or is very close to the sale date, days or hours away where the likelkyhood of the borrower meeting the demand is unlikely, where the borrower is "in foreclosure".

Sherriff sale is a foreclosure sale. State law governs the sale proceedure of  foreclosures or public auctions to collect amounts that are secured by liens. In some areas a representative of the Sherriff conducts the actual sale in other areas the Trsutee named in the Deed of Trust or mortgage conducts the actual sale. The Trustee is usually an attorney, but is not required to be in most states. I have been the named Trustee on deeds for over 15 years, that's a bunch.

REO or ORE, Real Estate Owned or Other Real Estate are two terms that describe the way banks or lenders carry foreclosed properties on their books, in the asset section titled Other Real Estate or Real Estate Owned (actually IMO, ORE is more descriptive since it sets properties aside from bank owned property such as the main bank building, branch banks and other properties used for banking operations).

I'm not a Webster or a West giving definitions but IMO, those are terms that are customarily used.

Michael Stole · Answer

The following is what I found from Fannie Mac, which makes a clear distinction between short sale and pre-foreclosure. REO is easy to define and understand. As to "foreclosure" on MLS, I never understand what it refers to.

Q6. Is a preforeclosure the same as a short sale?

No, not necessarily, although historically the terms have been used interchangeably. For
Fannie Maeâ€™s purposes, a preforeclosure assumes that the borrower has been
delinquent in paying his or her mortgage and the servicer/investor agrees to accept a
lesser amount to avoid the time and expense of a foreclosure action. A short-sale,
however, can refer to situations in which the servicer/investor of the mortgage agrees to
a payoff of a lesser amount than is actually owed, even on a current mortgage, to
facilitate the sale of the property to a third party.

What is foreclosure

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