REO, Foreclosure, Pre-Foreclosure

[Nathan Witte]

Hello,

Can someone explain what the difference between REO's, Foreclosures, and Pre-Foreclosures are? This might be a dumb question but I don't seem to see anybody ever talk about the difference between these.

Thanks,

Nate Witte

[Jessica Zolotorofe]

Sure. So a pre-foreclosure typically means the bank has filed a foreclosure action but has not yet foreclosed. Especially if it is a big national bank, they take forever. This affords the opportunity for a homeowner to sell the property if it is not under water for market value and pay off the loan before they are foreclosed upon, or more commonly, short sale the property with the bank's approval.  Takes a long time usually and it's a pain, but you can often get the property before it hits the market if you can find owners with distressed loans. Even on market, a short sale can be lucrative if you have the patience for it. 

A foreclosure purchase is typically done at an auction. The bank sells the property usually to investors and you have to attend the auction to get the property. Usually you can get a deep discount at a foreclosure auction. 

REO is a bank owned property. It means the bank has already foreclosed and they didn't sell it at the auction, either because no one bid or no one bid high enough for the bank to accept and they thought they would be better off selling direct to a buyer on the market. You can also get discounts on these because they are sold strictly "as is" and the banks want them off their books.

Hope this helps!