Pre-foreclosure leads can be a great source for real estate listings – but what are they exactly? People in pre-foreclosure are homeowners who have missed several mortgage payments and are at risk of having their property seized and sold by the lender. As a real estate professional, your services can be invaluable to homeowners in pre-foreclosure because you can help them navigate the process and assist them in achieving the best possible outcome. Learn more about the stages of pre-foreclosure below.
What are the stages before a property is foreclosed on?
There are three main stages of pre-foreclosure before a property is foreclosed upon. At KeyLeads, we only send you leads in these first stages – never leads that are already in foreclosure. This ensures you’re able to introduce yourself and start assisting these homeowners before the bank takes control.
Stage 1: Missed Mortgage Payments
If a homeowner misses a couple of mortgage payments, they are not yet in danger of losing their property but will start to see some missed payment reminders from the lender. The timeframe from the initial missed payment to the eventual foreclosure varies by state, as outlined by the U.S. Department of Housing and Urban Development. Typically, this process spans anywhere from 3 to 6 months, but exact durations may differ depending on state-specific regulations and procedures.
Stage 2: Notice of Default (NOD), Also Called Demand Letter, Notice to Accelerate
After a period of missed payments, usually around 90 days, the lender will issue the homeowner a Notice of Default, also called a Demand Letter or Notice to Accelerate. This is a formal letter to notify the homeowner that they are delinquent on their mortgage payments and that foreclosure proceedings will begin unless the delinquency is cured within a specified time frame.
Stage 3: Notice of Trustee’s Sale and Final Judgement, Also Called a Sheriff’s or Public Trustee’s Sale
If the homeowner or borrower does not resolve the default in time, the lender will then send them a Sheriff’s or Public Trustee’s Notice of Sale. The Notice of Sale and Final Judgement is filed with the county courthouse and clerk where the property is located and a date for the sale is set.
Is the property in foreclosure after these stages?
If the borrower fails to make payments before the date of their property sale, the property is in foreclosure. Depending on the state and legal circumstances, the property may be sold through a judicial or non-judicial process.
Stage 4: Trustee’s Sale and Day of Foreclosure
A property sale via judicial process simply means it must go through the court system. The property is auctioned by a court-appointed trustee at the county courthouse or another public venue and sold to the highest bidder, either the lender or a third party. A non-judicial foreclosure means that the property can be sold by a trustee appointed by the lender and doesn’t have to go to court.
Stage 5: Property Is Bank-Owned or Real Estate Owned (REO)
If a property doesn’t sell at auction or through the trustee sale it becomes Bank-Owned or Real Estate Owned (REO). This means that the bank or lender takes ownership of the property. At this stage, the lender may work with a real estate agent to list the property or use an asset management company that specializes in REO sales.
Stage 6: Redemption Period After Foreclosure
In many states, after the sale, the homeowner still has an opportunity to reclaim their property. This is called a redemption period. To regain ownership of their property, homeowners must settle their overdue mortgage balance along with any additional fees accrued throughout the foreclosure process.
Am I ready to work pre-foreclosure seller leads?
If you’re working with homeowners in pre-foreclosure, it’s important to understand the full foreclosure process so that you can provide education and guidance to your clients. Remember, one of the best ways to build a relationship with real estate clients is to be the expert they can trust. Make sure you adapt your marketing strategy to work with these types of clients, too. Know the pre-foreclosure and foreclosure process inside out and your clients will be in great hands.
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